(Guest post from David Schutz)
So, I’m going to come out of the closet as… a declinist. Much of the discussion here in RBC is about the Evil Reeps and the Pure-Hearted Demmies, and there are occasional blasts at the fanatic libertarians. The left-right spectrum has the major allegiances of American politics, and there’s a moderately coherent spectrum from Kucinich on the left to Armey on the right (I come in at about the William Weld/Scoop Jackson/Bob Kerrey point on that line, please note that my chosen champions are dead or out of politics).
So if left and right are your x axis, I’m asserting that Pollyanna-ism can be your y, and that it should give insight to think about people’s assumptions about the economic future in looking at policies today. You can be a things-are-getting-better-all-the-time person, a Pollyanna, or a the-future-will-be-much-like-the-present person (status quo), or a declinist, at the same time as having a position on the left-right scale.
Why am I a declinist? I see resource competition continuing and ramping up – the hundreds of millions of middle class people in China and India and Brazil will bid for the same Australian coal and Saudi crude as we will. And New Zealand lamb and strawberries, and – damn! – soon I expect an export market for maple syrup and we will have more trouble affording it here. All of us are together taxing the world’s capability to deal with our pollution. The abundant fisheries are overharvested. The easy trees are being cut. More costly conflicts diverting costly resources from production to military. As well, the ingredients of USA primacy in manufacturing and cultural/knowledge production are under threat. Used to be, you could make cars in Detroit, because you had a parts industry and competent engineers and the phones worked and the workers were literate and reasonably diligent and the power stayed on and the banks were dependable, and there weren’t that many other places in the world where all that was true. Exhibit A: the Yugo. Exhibit B: the Lada. Now, in Ulsan, you have a parts industry and competent engineers and the phones work and the workers are literate and reasonably diligent and the power stays on and the banks are dependable – so how can you keep charging a lot more for a Chevvie than a Hyundai? Not to dwell too much on Obama’s remark as reported by Rattner, early on, about Detroit, “Why can’t they build a Corolla?”
It costs about 14¢ a pound to ship stuff from China to the US. I think we are approaching a time when we can’t charge more, for manufactured goods, than the China price plus 14¢ a pound. For a Camry type car, that would be $580. If it takes 30 hours to build a car, US auto-making wages can exceed foreign by no more than $20/hour. Don’t plan your life around getting a job making pillow cases in a mill in North Carolina. The voice and image of an Arabic teacher can be transmitted for nickels, and the kids in my county who are taking Arabic are getting video instruction from a teacher in Cairo. This is rippling through the rest of the economy: used to be, someone might make a fairly even choice between working in a union factory for $40 an hour, and working as a fire fighter or paramedic for about the same wage. Now, Governor Walker and Governor Christie are doing very well politically by asking factory guys who can’t get that kind of a wage anymore why the fire fighter/teacher/zoning inspector should keep getting $40? I’m a civil servant, and when we advertise a job we get dozens to scores of qualified applicants. I’m familiar with the claims that civil servants get more money because we are better educated, etc., but the level of interest in civil service jobs suggests that these jobs are much more than adequately compensated. Even the work which can’t be outsourced – plumber, electrician, pediatrician – will have pressure as people move into those fields instead of the ones which can – factory work, radiologist. Some types of law work can be outsourced, and displaced lawyers are clamoring to enter the types which cannot. So I see general downward pressure on wages. It’s kind of musical chairs, and some were lucky to be in a much nicer chair when the tune ended.
One way to categorize a lot of the news we see (NJ teachers’ union struggle with Christie, UAW allows 2-tier wage system with new hires making half what the old-timers make, banks raising fees on credit cards to make up for the income streams they are losing in the wake of Dodd-Frank, occupational licensing struggles for barbers, etc.) is that they are efforts by people who found themselves in a nice chair when the music stopped to keep that chair, and keep it nice, and that includes not letting other people get chairs like theirs.
So I think we are in for a period of declining circumstances. New houses will be smaller, not bigger. Lots of college grads will be going back to live with their parents because they can’t afford apartments. Compensation for lots of different jobs – not just those with direct foreign competition – will drop. Driving the family minivan across the country to see the national parks will be an expensive and envied luxury. Couples will be thinking very hard about how many children they can afford. And I tend to see this as a result of global factors, rather than because of the evil machinations of The Koch Brothers, or George Soros, or Greedy Union Bosses, or Goldman Sachs. (Well, maybe Goldman Sachs…) If I were a young guy starting out in the policy business, I think I might try to make a career in decline studies. How did the Brits handle it, as the Empire went away in the aftermath of WWII? Japan has maintained enviable social solidarity in the last fifteen years of stasis, what are they doing right? What went so badly wrong for Germany after WWI, that led to their vile dictatorship? The money spigot went dry in Netherlands when their natural gas bonanza ended. What can we learn from these events, how can we treat people fairly going forward and maintain social cohesion, and do so while maintaining worker incentives to be diligent, resourceful, inventive?
So up top I claimed that on a left-right axis I am middle to center-right. But I think that a left-declinist or a right-declinist would have pretty much the same view of what the problems are, though the left-declinist would likely have more redistibutionist and the right-declinist more unfettered market views of what to do about the problems. My guess is that status quo believers and Pollyannas on the left would be inclined to look to the Koch Brothers and Goldman Sachs as villains in our current troubles, and to think that regulatory adjustments and protection for USA workers – both government and private – can bring back the wonderful US GINI coefficients of the 1970s. Pollyannas on the right will tend to expect that if we can just unleash market forces, and get rid of stupid stuff like ethanol subsidies, a rising tide will make everyone better off, and by the way currency manipulators and Greedy Union Bosses.