On Immigration into UK. It’s (not so) complicated…

I don’t think there is much doubt that the primary emotional driver behind the Leave campaign is that of immigration. Namely, a strong feeling among many British citizens that there are just too many immigrants in Britain now and that the flow should at least be reduced substantially.

Of course there are other drivers too: about the alleged ‘undemocratic’ nature of the EU, its alleged inefficiency and financial profligacy, its alleged ‘red tape’ regulatory regime over which we Britons are alleged to have little or no control, its alleged control over our justice system. All of these could be argued. For instance, there are some sectors of the business community (particularly some SMEs and swashbuckling entrepreneurs) which just hate regulation of any sort. But I don’t wish to talk about any of this now because these issues, none of them, or in combination, provide the sheer emotional charge behind the Leave agenda.

So let’s look at immigration.

We’re in the here-and-now, so best not to rabbit on about Britain being a ‘nation of immigrants’. Rather better to start with the fact that we have an order of net immigration from outside the EU which is similar to that of the net numbers from within the EU.   Net migration from within the EU and from outside the EU were both running at around 185,000 per year in 2015. Thus, despite the EU ordained requirement that the UK accept ‘free movement of labour’ to and from the EU, we have been perfectly free to cut non-EU immigration very substantially if the UK government had wished to do so. And despite David Cameron’s stupid promise to cut immigration to the tens of thousands, his government has done absolutely nothing to start any process of restricting non-EU immigration.

The reason the promise was stupid and the reason nothing has been done about non-EU net migration into the UK is that our economy has needed the immigrants, irrespective of source. The evidence for this is that, despite the total volume of immigration, the rate of unemployment in this country continues to decline. Within this, the level of employment among UK-born citizens continues to rise. See here. Both are now at near-record levels. This fuels our economic growth, such as it is.  Why this has not led to near record growth is another matter, to do with piss-poor UK business and state investment levels.

But the evidence of the need for immigration is also clear from the sheer numbers of immigrants gainfully employed in our social services, health services, construction and commercial sectors, without whom all these sectors would be in an even more woeful state than they are currently. Their state would be woeful because the UK-born population is ageing itself into retirement and ill health and our youngsters are simply not breeding enough to make up for this.

Were it not for the immigrants there is no doubt that some sectors would have invested more significantly in IT/Robotics/Automation to replace the greying UK population – but it has proved cheaper and more convenient to avoid doing this by simply employing more human bodies, irrespective of origin. I have argued in previous posts why business investment is so low in the UK (most especially the UK), but the problem is not only business – the state sector could also have been investing more, likewise argued in previous posts.

But since we are where we are, we need the immigrants who have come and are coming to fill the job vacancies we have in the UK. Without them our economy would decline and our social and health services would be in an even worse state.

But what about the over-demand (‘pressure’) on our social-service, education and health sectors?

This is simply the increased demand we should expect from an increasing population. Provision should have been made for it.

Indeed, up to 2010, until the coalition government abolished it, there had been a poor, underfunded, Migration Impact Fund (MIF) which had been half-heartedly designed to deal with precisely this issue. But of course that would have required government investment in the housing, health, social services and educational sectors expected to be negatively impacted in demand terms by a growing population. Not that a young, healthy immigrant inflow would be making significantly greater demand on social services and health (except probably GPs). But surely they would on eduction and housing needs. We can see the dilemma the UK government is in: its policy of austerity forbids it from borrowing more or taxing more so it can spend more, even on investments that would provide significant medium- and long-term economic returns for the state.

So, when it comes to immigration and the increased pressure it puts on housing, the GP health service (less so hospitals), and education in particular, the government is fighting the Leave campaign with one hand tied behind its back.

Which is most unfortunate, as otherwise it could easily have taken the steam out of the part of the anti-immigration movement which is not wholly motivated by a dislike of foreigners.

Meanwhile, Labour has been quite hopeless in its misguided and half-hearted emphasis primarily on the protection of workers rights, etc, in its fight against Leave.

Even if the Remain campaign wins, the referendum (delightfully referred to in the FT as the ‘neverendum’) has been a wholly unnecessary, wholly disruptive and damaging event. And a cockup from beginning to end.

 

 

 

Advertisements

A Critique of the NeoLiberal Agenda from the IMF (well…the bit of it that doesn’t mind offending finance ministers)

A paper from three IMF economists was recently published in the IMF’s Finance & Development online magazine (F&D) which is primarily aimed at non-economists. It examines neoliberalism in terms of success and failure.The paper defines neoliberalism as follows:

The neoliberal agenda—a label used more by critics than by the architects of the policies—rests on two main planks.

  • The first is increased competition—achieved through deregulation and the opening up of domestic markets, including financial markets, to foreign competition.
  • The second is a smaller role for the state, achieved through privatization and limits on the ability of governments to run fiscal deficits and accumulate debt.­

It’s marvellous stuff – and quite balanced in showing that there may be some benefits. But there are also severe risks, depending on how the agenda is carried out.

Free movement of ‘capital’ across borders, in the opening up of financial markets, for example, can carry very severe risks – depending on what capital and where (as Greece and Spain can well attest):

  • Some capital inflows, such as foreign direct investment—which may include a transfer of technology or human capital—do seem to boost long-term growth.
  • But the impact of other flows—such as portfolio investment and banking and especially hot, or speculative, debt inflows—seem neither to boost growth nor allow the country to better share risks with its trading partners.
  • This suggests that the growth and risk-sharing benefits of capital flows depend on which type of flow is being considered; it may also depend on the nature of supporting institutions and policies [My emboldening]

It concludes that:

  • The benefits [of the neoliberal approach] in terms of increased growth seem fairly difficult to establish when looking at a broad group of countries
  • The costs in terms of increased inequality are prominent.
  • Such costs epitomize the trade-off between the growth and equity effects of some aspects of the neoliberal agenda.­
  • Increased inequality in turn hurts the level and sustainability of growth.
  • Even if growth is the sole or main purpose of the neoliberal agenda, advocates of that agenda still need to pay attention to the distributional effects.­ [My emboldening]

In sum – shrinking the state is far from an unqualified good in itself, and where it leads to increased inequality, as it usually does, this is very bad – not only ethically, but also in terms of reducing national growth. And, as for financial deregulation, it can lead to… well, we’ve seen what it can lead to.

But don’t take my word for it. Here is the complete paper…

Oh, and by the way, I’ve been banging on for ages about the need for more government spending (housing, NHS, defence, education, wotevah). And now even the OECD has called for it as a matter of urgency (urgency, I tell you…)

Actually ‘Rick’ at flipchartfairytales gives a neat summary and analysis of the OECD call for action here…


Against Brexit

David Smith writes the ‘Economic Outlook’ column in The Sunday Times Business section. I don’t much like a lot of what he writes because he’s one of those columnists who has believed (and possibly still does) that the UK’s deficit must be eliminated and our debt must be cut now-now-now. Which is what George Osborne has been trying to do since 2010 – and singularly failed. But, in the meantime, Osborne has managed to cut capital expenditure significantly, while off-loading a load of costs that used to be borne by central government onto local authorities. Not to mention the damage he and his ilk of ‘small-staters’ have done to the NHS and social services. All for want of taxing a bit more and borrowing a bit more, when ‘the markets’ are actually paying governments to borrow. Nearly all mainstream academic economists believe this has been counterproductive, as do even some working for banks and newspapers, not to mention the IMF.

But I digress.

In today’s column (29-05-2016) David Smith tackles some of the Brexiters’ economic and ‘resources’ arguments. And he does it very well indeed.

Firstly, he quotes data from HMRC showing that ‘recently arrived’ immigrants paid £2.5b more in taxes in 2013-1014 than they received in tax credits and benefits. Presumably this surplus in tax revenue over expenditure from immigrants has been going on for some time – and is likely to continue. David Smith says ‘Part of this money has been used to cut the budget deficit. But it is also as available as anybody else’s taxes to pay for public services‘.

Well, wash your mouth out. He’s not seriously suggesting that, if we have a load of new immigrants increasing pressure on our housing and public services (NHS and education especially), we should be spending tax-payers’ money to boost spending on housing and public services, is he? I do believe he might be… Though it is almost as a throwaway, as if he doesn’t want people to notice he was kind-of suggesting it.

Which brings me to his second excellent point.  He looks at the alleged ‘job transfer machine’ – the allegation that all these immigrants are taking the jobs of stout British workers. David Smith points out that the number of UK-born workers in employment (I think he’s quoting ONS, but I can’t be sure) has increased by 1.1m to 26.25m since the low of Jan-March 2010. A record apparently. And, not only that, but in the 6 years to the end of first-quarter 2016 there was an increase from 70.7% to 74.6% in the UK-born employment rate. Just wow, eh? Still believe they are taking our jobs? Unemployment has been going down (fact) since all these immigrants have been ‘swamping’ in from the EU.

So, clearly, these new immigrants are taking jobs and starting businesses which truly needed to be filled and needed to be started. They are contributing in spades to the growth of the UK economy (our growth, while lacklustre, due to – ahem – austerity, has been better than that of most developed economies) and recent immigrants, as well as boosting growth, are, as we saw, substantial net contributors to our tax revenue.

So – that all being the case, we really should stop moaning about the immigrant pressure on resources and bloody, bloody (bloody) well spend the money, even if he have to borrow some, on training more doctors, other education-resources, housing, health-resources and social services that our increased population now requires. Surely that’s not difficult to see – unless of course one is determined to cut public expenditure, no matter what, as a matter of religious belief…

I’m not sure if David Smith would agree, but he does seem to sort-of agree. Doesn’t he?

And, while we are on the subject of Brexit – here is some really great stuff from ‘Rick’ at flipchartfairytales. He has done his homework…

 

 

 


Implications of Secular Stagnation and A Low Growth World

I would dearly love to have provided just a link in my previous blog piece with a comment or two on this most excellent (as usual) post from ‘Rick’ at the Flip Chart Fairy Tales blog. It goes much deeper than I would have been capable of. It is definitely worth reading the whole lot. Unfortunately his blog appears to be partially down while I write this, so here it is in full. Apologies to ‘Rick’ if publishing the whole lot here has been naughty… In the meantime Here is the general link to his site. And this is what he wrote and quoted from some other excellent people especially Duncan Weldon and Andrew Haldane:

Are we prepared for a low growth world?

Duncan Weldon declared himself a productivity pessimist earlier this week:

Productivity – the amount of output produced for each hour worked – rose at a fairly steady annual rate of about 2.2% in the UK for decades before the recession. Since the crisis though, that annual growth rate has collapsed to under 0.5%. The OBR has decided to revise down its future assumption on productivity from that pre-crisis 2.2% to a lower 2%. That small revision was enough to give the chancellor a large fiscal headache in his latest budget, but it still assumes a big rebound in productivity growth from its current level. What if that rebound doesn’t come?

It’s still perfectly possible to argue that productivity pessimism is overdone, that we are still suffering the lingering after-effects of the financial crisis that will eventually end. But with each passing year that becomes more difficult. A good strategy is to hope for the best but prepare for the worst. And the worst is pretty bad.

Why is it so bad?

Productivity is one of two key factors determining the trend growth rate of an economy; the speed limit at which a country can expand without pushing up prices. The other is population. Falling birth rates across the advanced economies created a demographic “sweet spot” that lasted from the late 70s until fairly recently. Fewer children meant a rising share of the population was of working age. But fewer children in the past means fewer workers today and rising longevity means a rising share of the population who are retired. Across the west, the amount of workers for each retired person is heading in the wrong direction. Increasing the retirement age and more immigration are both theoretical fixes, but the scale of both required to fundamentally change the picture is almost certainly politically impossible.

That demographic sweet spot, a rising working age population and fewer dependents, was one of the factors that caused the spurt of growth after the Second World War. Historians and economists will be debating the causes of the postwar economic boom for years to come but, when compared to previous fifty-year periods,  the last half of the twentieth century saw unusually high GDP growth. It is starting to look as though we have seen the last of it.

Duncan produced this graph a few weeks ago, form the Bank of England’s Three centuries of macroeconomic dataHe notes that, although it is early days, the early 21st century is looking more like the late 19th than the late 20th.

Cdw5hkXWIAAfz0P

When compared to most of the last 300 years, the last half of the twentieth century was an extraordinary time. Looked at in the longer term context, it was an extraordinary time within an extraordinary time. As Andy Haldane said, economic growth only really started around 300 years ago.

[T]he long history of growth looks rather different than the short. Secularly rising living standards have become the social and economic norm. No-one can recall a time when the growth escalator has moved anything other than upwards.

Yet viewed through a long lens telescope, ‘twas not ever thus. Chart 2 plots estimates of global GDP per capita back to 1000 BC. This suggests a very different growth story. For three millennia prior to the Industrial Revolution, growth per head averaged only 0.01% per year. Global living standards were essentially flat. Since 1750, it has taken around 50 years for living standards to double. Prior to 1750, it would have taken 6000 years.

Screen Shot 2015-02-23 at 18.02.36

It wasn’t until the start of the 19th century that most people’s living standards began to improve. It is, as Andy Haldane said, as though someone flicked a switch somewhere around 1750 and the technological take-off then fed through into a massive jump in per capita GDP.

Per capita GDP increased gradually during the 19th and early 20th centuries but steepest rise came after the Second World War. The period between the end of the war and the crash of 2007 saw unprecedented economic growth.

Real UK GDP Per Capita

Source: Bank of England: Three centuries of macroeconomic data.

And, to illustrate Duncan’s point, productivity followed a similar pattern.

Productivity BoE

Source: Bank of England: Three centuries of macroeconomic data.

If, over the next decade, we are to achieve the same increase in per capita GDP that we saw in the last half of the 20th century, the economy would have to grow by between 3 and 3.5 percent every year. Even the most optimistic forecasts are nowhere near that. As Duncan says, even the government’s revised projections might be a bit optimistic.

In the UK, policymakers once thought trend growth was 2.75% and have now cut that to 2.2%. Without a productivity bounce that could fall to closer to 1-1.5% in the coming years.

It might be early days but the chances are that Duncan’s bar chart won’t look that much different in 2025. Unless there is a sudden productivity spurt, which looks very unlikely at the moment, real per capita GDP growth will probably average something like 1.3 percent for the 25-year period.

It looks like this productivity slow down will be set in for some time. The recent improvement which might have indicated that we had turned a corner came to a halt at the end of last year. That most other western economies are also seeing something similar suggests that the causes run deep, although the UK seems to have particularly severe symptoms. The IMF has urged governments to invest to prevent a slide into what Christine Lagard called the “new mediocrity” but, even if governments rise to this challenge, they may find themselves trying to jump-start a dead battery. We have no idea what the multiplier effect of such a stimulus would be. It might be disappointingly small. What level of investment it would take to return the UK to 3 percent growth is anybody’s guess but it is likely to be a very big number.

This gives us a huge problem. Most of us grew up and formed our opinions and expectations during that extraordinary post-war period. We thought that the growth we enjoyed during that lucky half-century was normal. We assumed that living standards would improve and that each generation would always be better off than the last one. Furthermore, we built a state based on the assumptions of late 20th century growth.

The trouble is, the pressure on state spending will almost certainly increase. The ageing population will cost more even if we all work longer and stay healthier. We have no idea what the effect of climate change will be but it is likely to put extra demands on local authority budgets.

But low productivity means low wages which means low tax revenues and continued reliance on in-work benefits. Governments will struggle to keep public spending down and to raise revenue. A combination of higher taxes, cuts to public services and continuing government deficits looks likely.

This is bad news both for anti-austerians and for state-shrinkers. Governments will have their work cut out just to keep public services running at their current level. The brutal arithmetic of public spending means that even a real-terms freeze means significant service cuts.  A return to 2010 levels of staffing and provision looks unlikely unless people suddenly develop an appetite for much higher taxation. For the same reason, significant tax cuts also look improbable. Governments will be scratching around for every penny they can get.

A lower-growth world means that we will have to adjust the assumptions that we built up in the higher growth world. We will find our views about work, pay, living standards, property ownership, health and retirement challenged but none more so than our assumptions about what the state is there for and what it can and should provide.


Secular Stagnation … I Think

I’m not totally sure what secular stagnation means – other than growth is low and difficult to jump-start, and that is the new normal.

But I do know that large companies are not investing significantly, preferring to sit on cash-piles and pay their most senior executives enormous salaries and bonuses instead. This is because large corporations are oligopolies – pretty close to monopolies. So they have near complete control of their pricing and profit levels, which are hardly reined in at all by either the competition nor by adequate regulation. If a competitor does break rank, that competitor may well be bought out. So the large corporations are in an excellent position to milk their customers, their existing products and their productive methods for all they can. They have little or no incentive to invest in better products or services or better means of producing them. Why do that when they can give their senior executives bigger salaries and bigger bonuses instead. And it’s not even as if shareholders get a raise in dividends either, because fund managers who hold most of the shares have no real incentive to perform better – and, if they do protest at meagre dividends , they can safely be ignored: after all share prices can be kept high by the simple method of buying more of their own shares to distribute to employees, especially the most senior ones. The ‘light touch’ low regulation situation was initiated by Mrs Thatcher in the UK and Ronald Reagan in the USA. And then continued by Messrs Blair/Brown and Mr Clinton.

Free enterprise is easily corrupted into monopolies/oligopolies without adequate regulation. This kind of corporate behaviour illustrates the difference between short-term greed and long-term self-interest, because if the corporations were to be investing economies would grow more and everyone would live happier, healthier and longer lives, assuming reasonable wealth distribution, natch. (But the inequitable wealth distribution we currently have also started in the 1980s and is a linked phenomenon). Better growth and better wealth distribution would benefit the corporate execs’ descendants. But I suppose said execs are holding to the view that in the long term we are all dead, and in the short term ‘mine’s bigger than yours’ competition among the top 0.1% must be a very difficult mental habit to shake.

It is largely because of all this that productivity is so low – most especially in the UK, where it is now in a particularly abysmal state even compared with other major (G7) economies where it is none too healthy. And, of course, low productivity leads to low growth, which further inhibits investment because of lack of confidence. A viscious circle, indeed.  Employment of cheap labour from a cowed and nervous workforce has been kept up for a while, as cheaper than new plant, etc. But it now looks as if even that may be slipping, too.

Attempts to boost economies via central bank quantitative easing have not been particularly successful, as we are constantly reminded (it was well known to be a gamble from the beginning – likened to ‘pushing on a string’).

So now central banks are toying with the idea of negative interest rates – and some, including the ECB, are actually implementing it. This is also likely to prove ineffectual in its aim to boost investment and consumer spending. So some (wishful thinkers) are predicting ‘helicopter money’ as a last resort (just distributing cash to consumers to spend).

In an economy your spending is my income and my spending is your income. That’s why an economy is not like a household or a firm. So ‘Schwabian Housewife’ economics (we-must-all-live-within-our-means-and-debt-is-inherently-bad) is such total rot. It is based on a fallacy of composition (the whole is exactly like its parts: national economy=firm=household=individual), and takes no account of the ‘paradox of thrift‘ where if everyone saves and no-one spends, we are all impoverished.

The simple answer in a case like this is through what is called fiscal expansion by governments. Governments need to spend, even if it means borrowing to do so. But because of Schwabian Housewife economics this has become politically unfeasible. Most Western governments don’t even want to spend on infrastructure investment, let alone welfare, health, the military, research into carbon dioxide capture and storage, etc (etc). In the UK if the hapless Mr Osborne were to be seen contemplating anything more than a short tactical about-turn from austerity, as he did in 2011 and is now doing after his latest budget fiasco … well he couldn’t because the press would not let him. Plus, of course, the theology of shrinking the state in order to ‘unshackle’ so-called free enterprise remains a convincing-sounding argument to many like Mr Osborne, despite the fact that we have seen what unshackling free enterprise has led to so far. Obviously free enterprise has not been unshackled enough…? Ayn Rand stuff, anybody? That’s an argument like proper communism has never really been tried? Both obviously bullshit.

Of course what would really lead to fiscal expansion would be a good war. But that really would not be the kind of rescue from North Korea or Mr Putin that I would be hoping for.

 

 

 


On the IT/Robotics third (fourth?) industrial revolution, employment and wealth distribution

A certain panic has recently been setting in that the IT/Robotics revolution, as it continues to mature and develop, will significantly eat into employment opportunities among the middle-and-highly-skilled-working classes.

Highly skilled weavers (the Luddites) lost their role as a result of the first industrial revolution in the late 1700s as weaving became mechanised in Britain. And the industrial revolutions of steam, electricity, the combustion engine, and even later, early automation caused significant and painful socio-economic and employment disruptions – before the wealth and growth created engendered further employment opportunities.

In 1930, as Keynes looked into the future, he predicted an enormous growth in leisure, with people only needing to work for 15 hours a week to provide for their needs. So much, as the Adam Smith Institute people would say, for Keynes’ prediction.  For, not only did ‘needs’ change, but the actual distribution of income and wealth confounded Keynes’ prediction. If the wealth generated currently were distributed more equitably between ‘capital’ and ‘labour’ we might (or might not) be on our way to fulfilling his prediction. But it is not and we are not.

In the developed world, since the 1980s to the present, it is now agreed that there has been a very significant growth in inequality. It is all very well not needing to work as much in a more IT/Roboticised economy, but this has translated into under- and unemployment and/or low incomes for many rather than an unadulterated increase of pleasure in leisure. The very wealthy have garnered most of the wealth of economic growth into their own hands rather than it being equitably distributed among all. This is not because they are evil but because they, themselves, are most likely on a vanity treadmill to ‘keep up with’ (and, if possible, surpass) their own ‘Joneses’. Human nature. Wouldn’t you?

Throughout this process what we in Britain define as the middle-classes – lawyers, accountants, engineers, architects, market researchers, economists, and so forth, have remained reasonably comfortable on the whole. Though it is agreed that middle-class real income in the USA has not actually advanced since since the 1980s. While that of those in the top 0.1% of the population has increased enormously. Here is the picture for the USA.  In the UK the picture is more complex, and open to more ‘interpretation’ but there is some agreement that the ‘middle-income’ group of households is shrinking in comparison with the poor and the wealthy. A detailed ONS analysis of UK middle-income households’ changing wealth since 1977 is provided here.

Many predictions now point to a lot of these people losing their full-time employment to continuously maturing IT/Robotics, therefore, doubtless, needing to join the relatively poorly paid ‘gig’ economy in the next few years, or taking on more poorly paid work in other sectors, save for those with the most enterprising spirit. That doesn’t sound good unless something happens to encourage a more equitable distribution of wealth in advanced economies. Which does not seem very likely.

However, all is not necessarily doom-and-gloom, because this argument ignores the ‘demographic time bomb’ in advanced economies. Populations are tending to decline and age in advanced economies, following Japan’s lead. There will be a medium term demographic respite in some countries, like the UK, where there has been significant recent immigration. But as immigrants settle in, the declining-and-greying population trend will continue even in these countries. This points to a decline in growth and wealth in advanced economies. Unless…

…Unless IT/Robotics turns out to be less of a threat to employment and incomes than has been predicted. It could be a benefit if, instead of increasing unemployment or lower incomes, it ends up substituting for the inevitably missing population numbers. Some really interesting analysis of this is provided in these excellent blog pieces from ‘Rick’ at Flip Chart Fairy Tales, first here and subsequently here.

The distribution of wealth, however, will remain a major issue which is unlikely to be resolved.  Largely because of ‘capture’ of the political process by very wealthy people running the oligopolies and much of the media.  So, although it could, I am not at all optimistic that everything will come together at the right time and in the right way.

I think we may be in for some very turbulent times in the next few decades. This, from here, may be putting it mildly….

In today’s parlance, we speak of “disruptive technologies.” But no-one should be gulled by jargon: New ways of producing things often kill off old industries and jobs before the full benefits of the successor mode of production are realized. A certain degree of violence inevitably accompanies human progress.

According to Steven Pinker human violence is very much on the decline. This is, of course, disputed. But maybe we shall see a reversal, if decline there has been.

In the meantime here is the WEF’s latest report (2016) on the Future of Jobs. Among many other things it posits the following for jobs lost and created worldwide via the ‘fourth industrial revolution’

Winners and losers
Jobs lost
4,759,000 clerical/administration
1,609,000 Manufacturing and production
497,000 Construction and mining
151,000 Sports and creative industries
109,000 Lawyers
40,000 Mechanics/maintenance
Jobs created
492,000 Banking, accounting, insurance
416,000 Management
405,000 IT/data analysis
339,000 Architecture and engineering
303,000 Sales
66,000 Teaching and training

The report needs some digesting. It is survey-based. And while I note ageing population effects are covered in respect of demand and employment I don’t think it really covers the interaction between IT/Robotics/Artificial-Intelligence and ageing/population decline on employment. I need to read the report… (but I may not).

I should mention an amusing but dystopian SF story by Frederick Kornbluth in 1954, called The Midas Plague, which envisaged robots taking over most jobs. Which, of course, meant that most of the ex-workers were too impoverished to consume the robotic production. Yes, indeed, ‘lack of demand’ ensued (or maybe it was Secular Stagnation?). The solution was to force the poor to consume more and more by giving them reverse ration cards. The poorer you were the more your ration card forced you to use the production of the robots. There were sanctions if you didn’t because otherwise the economy would collapse (sound familiar?). Eventually one bright spark got their house robot to do the consuming… It’s a long time since I read that story, but I think it ended in the discovery of the miscreant, who was then promoted to the upper classes, needing to consume less, in order to keep him shtum. But I think Kornbluth may have found a solution to secular stagnation… (Are you listening Prof Krugman, Prof Summers?)

Oh… And here be yet another suggestion of things turning very nasty as a result of what I now guess we must all call the 4th Industrial Revolution (even though I still think it is really the 3rd coming home to roost, but who am I to argue with the Very Serious Gurus of Davos?).

I think I ought to link this to my post of Sept 29 2013. But I’ve just noted that in that post I incorrectly quoted Kornbluth’s 1951 novella The Marching Morons rather than his 1954 novella The Midas Plague.

I’ve edited this post more than enough and will now leave the subject alone.


More on the damage austerity can do when it can’t be offset by monetary policy because of ZLB

Demand creates its own supply and lack of demand reduces future supply. As reported here