When we talk about economic growth we talk about apples and oranges. And you’re thinking, What? Everyone thinks they know what economic growth is suppose to be, economist tell us that we are all suppose to get wealthier when economic growth happens. But what is economic growth? Well, we might as well ask what an economy is suppose to be. An economy, in its most basic terms is food, shelter, family life, and something to occupy our time productively. Ah, what do you mean by productively? We do something that occupies our time and provides some of the basics of living. Unless we are hunter-gatherers we have to produce food or shelter or clothing or rear children or take care of our parents in their older years, or provide for other family members, yada, yada, yada. This is humanity at the small group level, the basic group living. It’s not about money. Money is a convenience, nothing more. Money supercedes barter. Remember that in a barter based economy one must match buyers and sellers based on what they have to offer in goods and services with those who wish those goods or services. If I have apples and you want oranges the only way I can barter my apples to you is if you change your mind about wanting oranges. But then you have to have something I want. Maybe your have a bolt of cloth that I want. so how many apples will you take for that bolt of cloth? Money is that third party in the transaction. That is, you want a bushel of oranges and I have a bushel of apples but you have a bolt of cloth I want, we need to find a third party that has oranges and wants apples. That is what that third party is, a medium of exchange, so we substitute money for that third person.
So an economy is about the exchange of goods and services. It is also about the consumption of scarce resources that produce goods but not necessarily services. Essentially production of goods involves the conversion of raw materials into goods. Fertile land is used to produce food. Land, seed, and fertilizer are scarce resources which are used to produce food. But there is a forth element, labor or service. We seldom think of labor as a service but it is. When you work for another man or group you are providing a service. As a farmer I need fertile land to grow the seed I have obtained and fertilizer to increase my yield per unit of fertile land. But I need labor to till the fertile land, plant the seed, apply the fertilizer, and to harvest the crop. If I manufacture plows to till the land, seed drills to pant the seers, sprayers to fertilize the land and harvesters to harvest the crop, then I need the raw material of steel and other metals or plastics, sub assemblies from outer factories, and labor to put it all together into a tractor or harvester. When we think about it, out lives revolve around making things. Services provide the glue that makes things. So we sell out labor to the higher bidder, sounds like a good idea. Unless the highest bidder only offers minimum wage.
Technology, in the beginning it was our friend. It allows us to carry a larger population with out as heavy a dependence on nature as our hunter-gatherer ancestors. First you tame oxen then hitch a long pole with a short rod in it at a ninety degree angle to them and let them do the heavy work. Before that draft animal humans used to pull the plow and that was heavy work. A yoke would kill a pair of horses because it fit around the neck and choked the horse. Once we invented the harness, which fit on the shoulders of the horse we had real horsepower. Again, technology was our friend. Oxen may have been stronger but horses were faster. One didn’t need two oxen when two horses would do the work faster and just as well. I love the medieval monasteries because many of them were located near flowing water. Water could be harnessed to grind flour or other grains. It could operate saws and step hammers and all manner of inventive machines. Technology was our friend because it extended our muscle power so that we could support others who were “non-productive”. the head abbot, the scribe, the librarian, and all the others who did not directly labor in the fields growing food or making stuff.
But technology has ceased to be our friend. It was fine when we had non productive people hanging around. People such as kings and other royalty, a standing army for our defense, and the religious class that guided our religious worship. Today it’s the politicians and the various government employees that are the non-productive class. Technology helped to make the difference in terms of multiplying the productivity of those work produced goods and services that would support the non producers. Today we are awash with non producers and many are not employed by any government. Welfare is support for non producers. Unfortunately technology has become the ultimate enemy. Yes, producers of goods and services can multiply there productivity but fewer producers are needed. Automated assembly and robotic devices are quickly replacing these human producers. This means that there will be more non producers that need support. But automated assembly lines and robots don’t pay taxes that support the non producers. You see, the economy is a feed back loop. Humans consume and they must work, for the most part, in order to consume what they produce. Their individual productivity must be high enough to support those who do not work but only consume.
Decades ago Futurists predicted that our society would reach a point where machines would make all we needed and that individuals would only have to work a few hours a week to have their needs met. Have we reached that point? Not really. True, we have factories that can turn out all the toothpaste one could ever use and the assembly of cell phones has be automated to the point where even robots pack and ship each phone. We will soon have more robot driven long distance transportation and even our personal vehicles will soon drive themselves. In the next fifty years we will see far more automation and robotics that a science fiction writer could ever dream. But we will also see the almost complete breakdown of society for lack or work. Humans need activity, they need gainful employment, something to do that earns that medium of exchange in society or they will turn to activities that are destructive. When automation takes human employment it reduces prospective customers for its output. It reduces the reason for its own existence. We could build automated factories that from raw materials to finished product might produce a billion automobiles a year without human intervention. But who would buy them? Welfare recipients? But who would pay those welfare recipients? The government but who would pay the taxes that pay the welfare recipients? The automated businesses? That is a death spiral for the business would have to pay out in taxes an ever increasing portion of its profits until it was running at a loss. Technology is no longer our friend. For every new job it creates it will take away ten.
Everyone keeps talking about all the new jobs tat are coming. Really, from where? Technology, you dummy. We’ll need people to make solar electric panels and install them. Solar panel making will become highly automated, so kiss those jobs good bye. Jobs to install them? Solar energy can’t compete with coal powered electrical plants unless we artificially increase the cost of using coal where solar power has the advantage. But that is an inflationary move for the economy. And once the existing structures have solar panels then the need for high wage installers will decline to only a few individuals. And solar panels only provide peak power on sunny days from 10 am to 3 pm. Where do we get the power for the other hours? But there is higher education, college degrees will empower individual to obtain high wage jobs. But the cost of college has become astronomical, individuals can’t afford the high cost of a degree, particularly if there is not job available and the individual still has that debt from obtaining a degree to pay. Then we’ll make college free. But who will pay those in the university system their wage? Oh, we’ll tax businesses. But won’t the cost of goods and services rise and isn’t that inflation and doesn’t inflation represent the cruelest form of tax on the poor?
I love those “Green” people who call for self sustaining growth policies. People, there is not such thing as self sustaining growth. Growth has finite limits. Even technology has limits to its growth. Well, maybe we have too many people on this planet, maybe a bunch should be eliminated. That would not solve our problems. Let us say that we eliminate those third world people who consume very little while doing a lot of our old factory work. Well, then those factories come back here and it’s happy days are here again, of is it? The factories are back and jobs are back but there’s a catch. Those clothes you can buy cheaply at Walmart and those appliances you buy cheaply and all the other goods you so cheaply for have just gone up in price because those old jobs are costing the factory more that a buck thirty three an hour per worker. Outsourcing labor to foreign low wage countries was really great because as long as you had a job you have raised your standard of living with low cost good. True, services went much higher but with the difference you could afford it. But consider that if we brought back a great many of those jobs and paid minimum wage, what would happen to social media, which is all the rage? We support the inanity of social media because we have the discretionary income to do so. But technology, automation, and robotics will take that discretionary income away from us because it will take our job. Well, you think, what about the job of a dentist? A robot could be designed and built that would eliminate the need for a human dentist. There is only one job that can’t be automated or given to robots and that is the job of the foot soldier, a very non productive, very destructive position. Think about it.