A recent article in New York Magazine discussed the decline of American productivity. They cited Robert Gordon, an economist at Northwestern University, who has explained that growth in average Americans’ standard of living has peaked. Children will no longer be better off than their parents. Growth will not continue. He sees the extraordinary economic success since 1750 and especially in the 20th century as an unusual event which has run its course. Perhaps. But . . . .
What Americans need is not more stuff, but to use what they already have better. A structural reorganization of the American lifestyle would provide much more benefit than a continuing increase in personal income. Americans need to shift from the consumer mentality of having lots of clothes, toys and other things they collect in messy homes or throw away each year to having fewer, better quality things they keep and use. They need to go back to appreciating craftsmanship, rather than mass production. They need shifts from having lots of hours in the classroom to actually learning. From lots of big hospitals to more local clinics. From long work commutes to better organized cities. Admittedly changing to better designed cities will take a long while.
Let’s take each of these one by one.
Gordon is lamenting that while in the recent past children were becoming better educated than their parents, this trend has stopped. Recent generations would see the kids go to college, while the parents never had the chance. OK, perhaps the proportion of kids going to college has peaked. And college is hardly affordable. But we have a real problem in elementary and high school eduction.
We Americans, especially many of the poorest, are finding that even though our kids spend all day in school for 12 years, at the end they can not read, write, nor do arithmetic well. We build more schools, tear the old ones down, hire lots of teachers. Let’s face it, the bureaucratic system is rotten and corrupt. A case in point is when the New Jersey Supreme Court ordered increased spending to improve public school education, the result was not better at all. And why can’t we figure out what can make children learn? Here is a key way to improve our standard of living: teach our kids in the 12 school years before college starts!
Clothing and Toys
The quantity of clothing and toys Americans keep in their houses and also throw out each year is mind boggling. Here is proof that the growth rate of the American economy has been growing for naught. What is the point of trashing everything we own every two years?
And let’s not stop at clothing and toys. Everything from furniture to kitchen appliances to knick nacks gets constantly trashed. And let’s not fool ourselves into believing that the standard of living this represents does us any benefit. We can do without all the extra stuff and be just as happy, if not more so.
The problem of excess stuff is also related to the looming problem of lack of jobs. Few will dispute that we sent many of our jobs producing this stuff to developing countries like Mexico and China. Finally wages are going up in those places and stuff is starting to cost a little more, still prices will be cheap for a long time coming. Just because it is cheap and available, doesn’t mean we really benefit from it.
Americans need to develop a different frame of mind about having lots of stuff. We need to start buying well made craftsmanship (more about this under “Craftsmanship” below). Some of it made even by other Americans (who might like the job). How can we change our way of thinking? It has started already. We hear about the poor foreign factory workers who have to do the same repetitive task over and over for 12 hours a day 7 days a week and we feel guilty. Some of us say we want “fair trade” products where laborers are paid reasonable wages.
And it is certainly paradoxical, but if you could go into the home of the Chinese living in the heartland of China, you would see none of the stuff that we buy so much of. You would not see a single knickknack, vase, framed family picture, painting (except perhaps one of Chairman Mao), or other decoration. They take a very austere view that if it is not necessary for living, they don’t need it around their homes. And really, if you think hard about it, this view could benefit Americans as well.
What do the Chinese bring when they visit friends and relatives? Generally food or something strictly useful or money. What do they do when they go to work? Produce lots of stuff that Americans can buy, use for a few weeks or months, and throw away.
Private college education in America has become unreasonably expensive. Public college tuition has also dramatically increased as states are unable to maintain subsidies. Two and four year college education is cited as a factor in the calculations that America living standards have stopped rising.
Still every local community continues to pay to educate the children who live there from the 1st grade through the 12th grades – for twelve years, at tremendous expense and often with disappointing results.
There are opportunities for significant improvement in making those twelve years more educationally productive. Twelve years is a long time. Governments have tried. They tear down or remodel old schools and replace them with better facilities. They try charter schools and discuss private options. The room for improvement is tremendous and obviously a yearly improvement each year would have a large economic effect. But the results so far have appeared minimal to most educators. However, while it is easy to think otherwise, a 3% improvement in the value of the education is not the equivalent of a 3% improvement in test scores. It is possible that just a 0.1% increase in test scores translates into a 3% economic value. While that small an increase is hard to measure as an educational difference, it could still have a significant value over a person’s lifetime.
As a country we need to bring a much more scientific approach to improving and measuring the improvement in education. It is not that everyone needs to learn the same, but we need to work harder to understand what methods work effectively. We also need to use new technology, i.e., computers, handheld devices and software, to try to improve the transfer of knowledge and thinking skills to children.
We can also use technology, online courses combined with classroom discussion, to improve college education and reduce the cost.
Lifelong learning because of the increased availability of online courses is becoming a greater part of the total education a person receives over their lifetimes. Those who lament the decline of the availability of college education may be overlooking the effect of adult education on economic wellbeing.
Tens of thousands of cities and suburbs across the United States have laws that say people need to plant grass in their yards and keep their lawns mowed. They must have all adopted this rule from model codes for cities and suburbs. While lawns are certainly pretty, the laws could just as well say that people need to plant edible crops around their houses. In fact the laws now say that farming in the city is illegal. Farming is not growing grass. What is the economic impact of these rules? Grass seed companies, fertilizer and lawn maintenance companies do well as a result. But imagine if the laws encouraged (or even permitted) farming around homes? The same type of companies would benefit, yet a crop would also be produced. The overall economic impact of home oriented farming would be significant. And while it may seem like an odd idea, a visitor to all but the biggest suburbs and city centers in China will find that it is the norm there to have crops planted right up to the foundations of the houses and apartment.
Every American is aware that the health care system is expensive. Many can’t even afford to see a doctor unless they receive government assistance such as Medicare (for the elderly) or Medicaid (for the poor). The system is further broken because Medicaid does not pay for regular doctor’s visits, so that most of those who use it go directly to the hospital emergency room. The emergency room is not set up as a low cost center (for reasons this writer does not understand), so the Medicaid visits turn out to be very expensive.
The structural change needed has been documented by practioners such as Dr. Paul Farmer. Low cost walk in centers primarily manned by nurses and other medical assistants who could treat common ailments such as colds, venereal diseases, obesity, broken bones, etc. And also served by doctors who could see more serious problems. More preventative medicine that would try to reduce diabetes, heart disease, strokes.
The result from these and similar changes could be a very substantial increase in the average person’s wellbeing and disposable income. Obamacare is a compromise that falls far short of the changes actually needed. We need to have more public dismay to get congress to create laws that will encourage more clinics.
The New York Magazine article also interviewed Erik Brynjolfsson an MIT business school professor who was optimistic about the 3D printing “maker movement”. He said robots would start to do more of the American jobs and digital printing will replace some manufacturing. But the downside was that many workers would become unemployed. Changes due to invention have been happening since the creation of the vacuum cleaner, washing machine and automated assembly line. It is not hard to imagine that in the near future taxi drivers may be replaced by self driving automated taxi’s. What then for the drivers?
Some robots require significant capital investment. That reduces the rollout. Perhaps an automated taxi will cost a whole lot to buy. But for displaced workers a robot performing a service is not so much different from a foreigner worker making a good. The American worker loses the job he had learned. Then he or she needs to find some other work with other skills. Some of them may learn to service the automated taxis or run the 3-D printers, just as in an earlier time some learned to import foreign goods. But many displaced workers won’t be able to adjust easily.
Keeping the economy running is a lot like playing musical chairs. It all works fine as long as the motion does not stop. In our view economic booms has a greater beneficial impact on the general wellbeing than is usually recognized. News reports tend to focus on the “crisis” caused by the collapse of a “bubble”, rather than all the benefit derived in the formation of the bubble. That benefit being keeping people busy building what ever the bubble was about. In many cases, such as real estate over construction, after the collapse, someone is left with a real product that could some day be used, if not right away.
When it comes down to keeping people employed three things matter:
1. Having people work on something.
2. Having the work they do be useful in some way.
3. Having people receive payment for what they do.
During the 1980′s in Texas there was a wild over building of apartments and office buildings. Over lending for these buildings triggered the savings and loan banking crisis. The government repaid the deposits and took over the loans from many banks, as it liquidated them. Yet, there was a silver lining. The building boom employed lots of people, paying them salaries to make the offices and buying materials for their construction. In the end, even though the buildings were empty for a few years, they were there and could be used. Today twenty years later property prices in Texas are at an all time high, even as the rest of the country still is recovering from our most recent crisis. The down side of the over-lending was the closing of the banks and curtailment of additional lending for several years..
The Lessons of the Music
We can learn from the spirit of the booms and busts we have experienced. The experience shows that even though we may be working hard for something that has little value (telecom over investment) or some future but little present value (empty office buildings), keeping us busy and employed has a great value. It would be better if we could try to get excited about things with value. That is because we could eventually use more of what we build.
It is clear the most people that too much of something really isn’t of greater value to them than just enough of it. So having closets full of clothing doesn’t help us to look better or dress warmer. Chests full of toys don’t help us to play better and have more fun. Here is the point: we as a country need to start appreciating hand made quality. Especially things hand made with love and care by other americans who live nearby us. This is what will protect us from destroying our social web by embracing too many robots. We need to start embracing the craft work that can be done well by our neighbors.
Yes, it is true that American’s over-consume, but the the decline of the middle class is because of a concerted attack over the last forty years. It used to be possible to raise a family on one, regular, salary. Not anymore. While a lot of the suggestions in the article make sense, there needs to be other reforms:
Unions need to be bolstered.
CEO pay needs to be capped as a multiple of the lowest wage of a particular company.
The laws governing companies need to be changed. Now, a company’s highest responsibility, under the law, it to maximize profits for the shareholders. Good corporate citizenship needs to be put on an equal footing with benefiting the shareholders. If a company acts grossly contrary to the good of the community, it should suffer a corporate death penalty under the law. (This actually exists, though it is rarely used).