“Scarcity” at Root of Political Polarization?

July 23, 2014

http://www.pbs.org/newshour/bb/politically-divided-wisconsin-little-incentive-seek-middle-ground/

The above link will take you to a story that aired on the PBS Newshour on July 18th.  It’s a story about the political divide in Wisconsin and is followed by analysis by David Brooks (conservative and Wall Street Journal columnist) and Mark Shields (liberal commentator).

Brooks’ analysis was particularly poignant.  He explained that he once believed our polarization was a top-down, Washington-based phenomenon, but now sees it as a bottom-up movement, driven by “scarcity.”

The significance of this is that “scarcity” is a term used by economists, primarily to deride those concerned with overpopulation as having a “scarcity mentality.”  It’s an alternative to “Malthusian,” lest the latter term become trite.  You see, economists don’t believe in the concept of “scarcity.”  Man is clever enough to stretch resources and always assure that there is enough for all as our population continues to grow, say economists.

So it’s significant that someone of Brooks’ gravitas sees actual scarcity in our economy that is the driving force behind our polarization.  It’s not a scarcity of natural resources but a scarcity of jobs, a scarcity of income, a dwindling of resources needed to provide adequate health care and of government resources necessary to provide a social safety net.  Such scarcity now pits Americans one against another as they compete for these ever-more-scarce financial resources.  Each side now sees the other as a threat instead of as fellow Americans working toward a common goal.  The haves see the have nots as a threat to strip them of some of their wealth through redistribution schemes.  The have nots see the wealth of the haves as ill-gotten gains that have been taken from them unfairly with the collusion of their conservative politicians.  With each side  perceiving themselves as having their backs against the wall, neither is willing to compromise.  We’ve become like an overcrowded cage full of  animals where all was peaceful until the zookeeper began cutting back on the food thrown into the cage.

This scarcity is the direct consequence of the rising unemployment and worsening poverty that’s inescapable as overcrowding drives down per capita consumption and, with it, employment.  And it’s not merely a national phenomenon, but a global one, as labor forces continue to swell and compete for ever-more-scarce manufacturing jobs just to keep themselves out of poverty.

If Brooks is right (as I believe he is) that scarcity lies at the root of our political polarization, then the polarization and gridlock in Washington is only going to get worse.


July Jobs Report Further Evidence of “Deep Structural Problems” within America’s Economy

August 5, 2013

The Bureau of Labor Statistics released another humdrum, “new normal” employment report for the month of July on Friday morning.  Non-farm payrolls added 162,000 jobs – below expectations and the lowest level in four months.  The unemployment rate dipped by 0.2 percent to 7.4% – the best level in 4-1/2 years.  However, though the labor force participation rate improved very slightly, it has barely budged since the depths of the recession.   What this means is that the economy has barely added enough jobs to keep pace with the growth in the labor force caused by immigration-fueled population growth. 

Commenting on the report, New York Times columnist David Brooks, a conservative, commented during the PBS Newshour’s “Brooks and Marcus” segment on Friday night that, in the wake of this report, “… the structural problems are becoming super-obvious … we’ve got some deep structural problems …”  Obama bashing by a conservative columnist?  No.  His liberal couterpart, Washing Post columnist Ruth Marcus, agreed with him.  Brooks went on to comment that “something really fundamental has shifted in the economy,” that no one seems to have answers and that our political system is ill-equipped to deal with it.

Brooks cited some factors, but can be forgiven for missing the real issue (since even economists don’t recognize it) – that continued population growth is whittling down per capita consumption, adding workers to our labor force at a pace incommensurate with the economy’s ability to absorb them. 

This weak employment report is corroborated by the equally weak preliminary report of 2nd quarter GDP growth, released two days earlier, which showed the economy grew by a measley  1.7%, on top of an even weaker 1st quarter growth of 1.1%.  What’s amazing is that this economic weakness is in spite of the Federal Reserve pumping a trillion dollars into the economy over the past year.  Something is indeed “structurally wrong” when the economy fails to respond to such unprecedented stimulus.

The following are additional high-lights from Friday’s employment report that underscore the weakness of the report:

  • Both the May and June reports were also revised downward by a total of 26,000 jobs.
  • The number of long-term unemployed was unchanged in July.
  • The employment to population ratio was unchanged.
  • The number of people employed part-time for economic reasons was unchanged.
  • The number of discouraged workers, 988,000, is up 136,000 from a year earlier.
  • The job growth was concentrated in low-wage sectors:  retail (47,000 jobs), and restaurants and bars ( 38,000). 
  • Manufacturing employment was flat, in spite of a growth of 9,000 jobs in the auto industry.  This means that the rest of manufacturing actually contracted by the same number.
  • Employment in the health care industry has stalled, as I’ve long predicted it would.  In 2012, health care added an average of 27,000 jobs per month.  In 2013, that’s fallen to an average of 16,000 jobs.  In July, it fell to zero. 
  • The average work week fell by 0.1 hours in July.  In manufacturing, it fell by 0.2 hours and overtime declined by 0.2 hours to 3.2 hours per week.
  • Average hourly earnings fell by 2 cents.

Something is structurally wrong with the economy.  It’s structured around trade policy based on flawed trade theory that’s guaranteed to result in a huge trade deficit in manufacturing goods.  And it’s structured around a reliance on population growth to stoke economic growth, a flawed strategy that’s now destructive and self-defeating.