“Nothing has defined the 2020 market more than the erosion in the value of human capital,” Bloomberg’s Sarah Ponczek wrote, in a great piece dated Wednesday.
One of the many tragedies of the pandemic is the extent to which it may have accelerated the already rapid decline of labor’s clout in developed markets.
It’s difficult to justify investment in labor when profit generation is increasingly independent of workers — or at least blue collar workers in advanced economies.
This goes well beyond automation. The worsening plight of manual laborers in developed markets (and especially in the US) has been the subject of voluminous research and is linked to all manner of pernicious phenomena, including what economist Anne Case and Nobel Prize winner Angus Deaton, have called “deaths of despair” in America.
That figure, one of the most poignant from Case and Deaton’s book, is astounding.
“In almost all wealthy countries, mortality rates for those aged forty-five to fifty-four declined at an average rate of 2% per year from the late 1970s to 2000,” they wrote. While the comparable figures continued to decline for virtually all other rich countries, Case and Deaton document “an entirely different pattern” for white non-Hispanic Americans.
The book delves into the underlying dynamics, but suffice to say opioids and alcohol play a role, as does the broken promise of American-style capitalism. “Social and economic forces… are making life harder for the working class,” Case and Deaton said. “For those who used to prosper in America, capitalism is no longer delivering.”
The pandemic is likely to accelerate at least some (and likely most) of these dynamics. Civic responsibility has become such an alien concept to Americans, that large swaths of the populace refuse to take even the simplest steps to protect their neighbors (e.g., wearing a mask to the local grocery store).
The decline of community — the fraying of the country’s social fabric — is synonymous with the disappearance of civic duty as a unifying concept. This speaks to the tragic irony of populism in America over the past five years. It seeks to capitalize on the discontent behind the trend shown in the figure (the black line above), but the methods employed entail fostering still more division, further undermining societal cohesion and community as a concept.
It’s difficult to overstate the pandemic’s effect on these dynamics. Stay-at-home orders and containment protocols by definition increase Americans’ sense of isolation, while simultaneously exacerbating economic precarity.
At the same time, the measures needed to curb the spread of the virus are characterized by opportunistic politicians and pundits as an infringement of “rights” and an affront to “liberty.” That narrative was packaged and sold to the very same downtrodden, blue collar, white workers who were already suffering, as documented extensively by Case and Deaton.
This is a precarious socioeconomic situation, and it’s colliding with a renewed push for racial equality in America, which was itself turbocharged by the pandemic as COVID-19’s effects were felt disproportionately by communities of color.
Politicians seeking to shore up their own depleted political capital continue to implicitly and explicitly suggest that the plight of the white working class is jeopardized further by efforts to secure racial and gender equality.
At almost every turn, the tie that binds — income and wealth inequality — is deliberately obscured. And for obvious reasons. If the vast majority of the populace suddenly realizes they have something in common that’s more important (or at least more impactful when it comes to their capacity to live comfortably) than everything that makes them “different,” the system will face an existential crisis. And so will the increasingly small number of people who benefit from its preservation.
And that brings us back full circle to Ponczek’s Wednesday piece. The pandemic has, of course, exacerbated wealth inequality dramatically (figure below).
“At least in the stock market’s cold-blooded logic, 2020 will be remembered as the year when people became superfluous to the cause of progress,” Ponczek wrote. “At a time when the pandemic put 22 million Americans out of work, equity prices nevertheless rose by $5 trillion, thanks to gains in automated tech titans optimized for lockdown commerce.”
The result, Ponczek remarked, is a conjuncture that symbolizes “inequality in the virus age, as money flowed to the rich and the poor got hunger and hardship.”
There are many villains in this movie. Obviously, COVID-19 was the chief antagonist in 2020. Globalization, for all the utilitarian good it’s done around the world, has undoubtedly contributed to middle-class misery in advanced economies.
But I would argue that perhaps more than anything else, we’re witnessing 21st century capitalism indicted in the court of reality, where it’s being arraigned on a long list of charges, all of which are felonies.
Can’t those workers just “pivot” to food delivery and scooter recharging jobs?
I know you’ve stated this information before but this piece really finally brought it home. Feel like I’m looking at out the window seeing the world more clearly, with better understanding. Wonder if I got my Republican and now Trump voting uncle to read it if he would see the truth in it or if he would dismiss it out of hand.
This piece and ‘Adventures in Rage Kapitalism’ really hit the spot for me by providing structure and facts to what has been difficult for me to get my head around. Something finally seems to make sense, frightening but nonetheless elucidating. This is what keeps me coming back to this site, sometimes hourly looking for more.
I pay subscription money to writers who call themselves “conservative.” I also follow a handful of thinkers on that side.
The reasoning is usually along the lines that the government should get out of the way, that elected officials are corrupted by money. Government is too big. Taxes. The federalism debate is still a raging inferno. The narrative, decidedly, is that we have lost our way.
Aside from the role of government, and how identity politics has distracted us, the conservatives I follow don’t provide solutions. Human suffering is not a topic. Generally, people are not topics; the individual is. There are no solutions on the conservative side for what to do with the surplus labor.
About your uncle, I have Trump voters in my family, too. The tact I take is that I control myself and have no role in their lives as a sort of change agent.
What I learned from following conservatives, and talking with my family, is they have a very high conviction level in their beliefs. The blind spot is people. They will be as surprised as anybody by the emergence of a movement that unites the surplus labor across race and geography.
Yeah, the conservative solutions typically boil down to either do nothing and let the chips fall where they may or privatize and incentivize with tax credits. Taxes are slavery and the greatest cause of human suffering that was ever known in that universe.
To your point about trying to convince relatives or friends, I grew up in an extremely conservative rural area and agree that nothing I say is going to sway their opinions. I think the most important thing is to try to reestablish some level of social trust. It’s natural that we want to condemn the abhorrent behavior condoned by so many Trump supporters, but lectures and righteous indignation only cause them to retreat further into this bizarro world that Trump has created. They’ll just throw out the whataboutisms and deflections. Unfortunately, the identity politics that Trump is exploiting will require long-term rehabilitation of social trust and even that may be a failure as that trust is very hard to repair once it is broken.
Well worth a re-read…as taken from the recent Rage Kapitalism article H linked us to:
… Their social metabolism works differently. The myth that there’s a first prize for everyone is still the basic axiom of American cultural ideology. The deep-rooted belief of the underprivileged that they are not victims, just temporarily embarrassed millionaires, is still the fundamental determinant of the American social identity.
After being robbed by one pyramid scheme, they rush straight into another, as if nothing happened – same type of scam, organized often by the same person who robbed them the first time (or by his cousin); it doesn’t matter, there are always rubes to be recruited. There seems to be a culturally conditioned chronic delusion about the wealth alchemy that pushes the entire nation to aspire to become instant millionaires, which prevents them from resisting a scam, even when it is transparent and clearly defined as such.
Donald and his trusted insiders are setting the table right now for Round 2. If 40% of Americans do not believe the election was fair then this further excerpt from that article quite plainly telegraphs what lies ahead, and the spolis yet to come :
At the core of these developments reside continuous attempts to manage the crisis of legitimation of a system that has run its course with pyramid schemes of rage: Populist movements, which have emerged as a consequence of this crisis, have enticed people to deposit every last molecule of their grievances in rage banks run by the current Right Wing political parties. Their game plan is to appropriate those deposits and declare bankruptcy, in pretty much the same ways as regular banks did in 1990s Albania. And who’s better suited for this job than a certified conman with an uncontested record of fraud and serial bankruptcies?… The holy grail of this ideological affliction is the belief in the sovereignty of luck: 1) There is a first prize for everyone and 2) Who wins is right and who loses should not complain. If a person commits a crime and gets away with it, instead of condemnation, society responds with: “Good for him”. This transposes ex-ante any transgression as another failed attempt to realize what is rightfully yours, and thus blurs the boundary between right and wrong. There is no room for ethical judgment — hurting people or doing social damage, is not assessed in a broader context of ethics and general system of values, but is, at most, taken as an error in calculation.
The unwavering emotional investments in the ideology of meritocracy and, at the same time, inability to understand subtle differences between capitalism and pyramid scheme prevents them from being able to resist and defend themselves against fraud. Capitalism is prepared to put up with every form of irrationality as long as conditions for its technical rationality are preserved. And because of that, American self-declared libertarians and defenders of the “free-market” capitalist value system, as much as they believe in the power of rationality, fail it repeatedly. There is a little Albanian capitalist with a learning disability under each MAGA hat, all 74 million of them.
As runamok states, they will be as surprised as anybody by the emergence of a movement that unites the surplus labor across race and geography. I’ll be surprised too, if the architects of such a movement can cross not just those divides, but also the vast chasm caused by the disparity of wealth. The rich will have to see that a rising, organized global tide floats all boats and the great swath of displaced lesser folk will have to give up on the dream of getting rich quick and with little governance on how they go about that or the societal expense they cause in embarking on such a mission.
Felonies? OK.
Simple reality is that we as a species developed by using tools to make the world more widely suited for our hand to mouth reality. Human creativity is never going to be limited to purely chairbound efforts. Tool users. Paying people to dig ditches and then fill them in may be a very real way of looking at things as a significant part of population will never sit still. Capital/efficiencies in a world economy has no significant placement/need if they are living in economically advanced locations. Unless it is made so. Navaro thinks we have a comeback but the Chinese must understand, as we should ,that robotics and 3D printing is making less production touched by human hands. Our wonderfully designed hands touch less and less of what we eat and desire. Much more brain and far less hand is a simple reality. Educational advances go only so far. But so many hands with mouths to feed. Reaching for the bottle and the liquid resentment it provides is reason enough to dig ditches and fill them back in until a more meaningful measures are realized. And yes,taxing the productivity of manufacturing/capital is a very realistic solution. Trickle down will not work because robots are not great consumers.
There’s really no solution in the offing. At least not yet. It all seems like it’s hurtling toward a turning point in the meantime, doesn’t it?
Re digging the ditches, I would put that in the infrastructure re-build category. Probably the best, doable-now policy that I can think of. All the while, we are incapable of acting even on this.
Certainly feels like there isn’t much time to figure this out. I often feel like I’m watching the moments before a train wreck, helpless to do anything to stop it.
Sobering.
This is what we’re waiting for. Still no inkling yet from which quarter or when it will emerge:
“If the vast majority of the populace suddenly realizes they have something in common that’s more important (or at least more impactful when it comes to their capacity to live comfortably) than everything that makes them “different,” the system will face an existential crisis.”
It’s been said that the greatest fear of those at the top is the unification of the surplus labor across race and georgraphy.
One of the few things I recall from my cursory college studies was the growing socialist movement in Europe during the run-up to the first world war. Socialist idealists fully expected working class solidarity to overwhelm nationalism as the clouds of conflict gathered.
Nope. Nationalism prevailed over economic self-interest.
Have things really changed?
Karl Rove must have been a student of history when he assembled his coalition of envy, resentment and racism to keep the GOP in power. And then Trump clearly reminded us that it is easier to put the blame for personal and systemic failure on foreigners, immigrants and minorities. “It’s OK. It’s not your fault!”
Divide and conquer, or at least defend the status quo.
Ray Dalio may ask permission to include this piece in his next chapter about the decline of America as it seems to fit perfectly within his schema.
This effort is quite sobering but not surprising given the past 40 years as technological advances have coincided with the gutting of truth in reporting standards and the resultant rise of the well financed public relations industry masquerading as news media.
‘“Nothing has defined the 2020 market more than the erosion in the value of human capital,”‘
As I read this and thought about its implications a couple things jumped into my head. First, those surplus workers, if they get jobs at all will be paid what? I just read somewhere today that in the new year half the states will be raising their minimum wage. Big whoop! To what? Multiply that minimum wage by 2000 and you get the gross pay for the bottom 30-40% of wage earners. Check it out; $11.50/hr, something my cleaning lady calls a “good job” (and she hasn’t had any job for six months) works out to 23k a year. Anybody reading this know how to live on 23k? People at this level have crappy nutrition from cheap empty calories (something that makes them vulnerable to health issues); little or no medical care; face a constant risk of eviction for missing even one rent payment; can’t pay their utility bills … And consider this as well, these people, when they have a job, are effectively the 21st century’s version of slave labor. They can’t eat without the job and they barely survive with it. The phrase “human capital” would have also been used by the 18th Century big shots who actually owned people, human capital if you will, without whom the economy of the day couldn’t function. Those of us driving around today in posh cars, having dinners delivered, buying meal kits so we can play cook with our kids and working our six-figure jobs from home think this is “roughing it.” Shame on us! The people stocking the shelves in WalMart and Kroger can barely make rent. That’s roughing it. The people cutting meat at that damn Tyson plant in Waterloo, IA, maybe can hope they don’t get COVID and live for that big raise to $12. They can’t afford to quit and we can’t run our “system” without them. Sounds a hell of a lot like slavery to me. How far have we come in 300 years? Not too far. Those who can will still exploit those who can’t, while pretending those folks don’t exist and calling those who care about their neighbors socialists. What a country.
Nice reflection on the piece Mr Lucky, hard to disagree with any of your points, indeed we have reached the stage where if you care and point out the glaring inequality and flaws in our system you’ll likely be dubbed a socialist by someone who would struggle to define that term. If you really care and become vociferous then you’ll be dubbed a commie…
I heard a poverty expert say that a person who wants off all government support needs to make $23/hour to break even – not get ahead – just break even. Thus, $23/hour is the base needed for a life equivalent to public housing, medicaid, and food stamps (if any are still available). Sobering.
Yes, this is a modern slavery.
Sometimes I’m thinking – what if one day all those people will stop working. Just say – it’s enough, we don’t want to do dirty job for pennies and live in misery, we are tired from that live. Public services will stop working, civilization will fall like a house made of cards.
With increasing automation, over population will become an even bigger problem, imho.
OK, serious question. What are some solutions? Full-on communism is a disaster as it removes the incentive to work. Plus, it has never worked in any country where it has been tried. Is it more steeply progressive policies such as higher marginal tax rates, higher minimum wage, UBI, expansion of Medicare (while keep private and employee-sponsored insurance), paid family leave? I am not educated enough on the Scandinavian model that many progressives hold up as an example. But these seem somewhat faulty to me, especially Norway which is fortunate enough to be a well-run petro-state.
I suppose we could start by melting down some idols like ‘wealth trickles down’ and ‘if your not getting ahead, I guess you’re not working hard enough’. Maybe if we can move on to a more realistic paradigm that forms policy around problems that has a positive effect to the greatest amount of citizens and then move ‘down’ from there to smaller circles. Seems like a legit start and go from there.
Those are fair questions. I think UBI is table stakes and actually eliminates the need for a minimum wage assuming the UBI is over $1,000 a month per person at minimum and government-funded healthcare is included. Also, paid family leave and publicly-financed early childhood care and college would make raising a family feasible financially. Heisenberg has mentioned on numerous occasions that he would recommend a federal jobs guarantee that pays a livable wage to create a floor in the private market.
As far as the Scandinavian model, they do indeed have an advantage in natural resources, but the US prints the world’s reserve currency and there aren’t any serious replacements on the horizon so we have a massive funding advantage that those countries don’t. The only real hurdle is the “well-run state” part. That is where we fail miserably. The Scandinavian countries have high levels of social trust whereas we get identity politics and propaganda.
re. Scandinavia, I would politely beg to (at least partially) differ:
Norway is, indeed, a petro-state. The other Scnadinavian countries not so much.
Except for vast forests and some mines there is not too much to be had in terms of natural resources (as in mineable minerals, not in stunning landscape which is quite a resource in itself imho) and not enough to put them at an “advantage”.
Totally agree on the “well-run” and “social trust” part. I think that is key.
Yes. In Sweden the level of trust within the society and between the state and the members of the society is incomparably higher compared to the US.
But it would take a millennium to build such a trust. And I’m not sure if it is ever possible in such a big state.
Thanks for the visual “The Rich Get (much) Richer.” This tells us the score while working toward keeping up with the Musk-Ox!