Sunday, November 22, 2009

The problem with unemployment is that it's too low

I've been thinking a lot about the economy the last few months — shocker, right? — and I think I have an insight as to why we have such a bubble-prone and consumeristic society.

Let me back up a second and explore the problem: what's to blame for our double-digit unemployment? Subprime loans and over-leveraged banks, sure; but if GDP is a measure of a nation's wealth, and wealth is a measure of productivity and resources, how did we lose so much of GDP without any major disasters wiping out people or natural resources? Even the Great Depression had the Dust Bowl to help it along (although that isn't what started it). But today, America has about as many able-bodied people as it did five years ago, and about as many natural resources. Our GDP should be about the same now as it was then.

I'll skip to the punchline: one reason we have so many people unemployed may be that a lot of our jobs aren't necessary. Unemployment is high because there's nothing for people to do.

And technology is to blame. It used to be that a person's job was hunting and gathering, and that job generated just enough wealth to feed his family. There were, by definition, just barely enough people to fill the open positions. I don't know of any stats from pre-Sumerian days, but I'd bet they had somewhere around 0% unemployment.

Today, only about a third of the world is involved in creating food, and it's even more drastic in the US, where about 2-3% of our jobs are agricultural.  The other basic requirement for survival, shelter, doesn't provide nearly enough jobs to employ the rest of us. Residential construction employs about 1 million people in America, or around 0.3% of the population. In short, technological advances have enabled a minority of the world's population (including just 3% of America's) to supply us with the bare necessities of survival — a task that used to provide full-time employment for everyone.

The rest of us need jobs, though, and that's where consumerism kicks in. We make stuff that we don't really need and sell it to one another, because otherwise two thirds of the world (and 97% of America) would be out of a job. All of these jobs are predicated on the assumption that I can sell you something superfluous, because you have lots of money to spare, because you just sold someone else something superfluous, ad infinitum.

If I suddenly suspect that you won't buy something, then I have to lower my production, meaning I have less money to buy something from someone else, who was going to use that money to buy something from you so that you could buy from me. The same 97% of American GDP that was previously functioning without a raison d'être now shuts down for the same non-reason, which is the state we're in now. Indeed, if you look at the states that were hit least by this recession, they tend to be the ones that farm most; that is, the ones that produce something we actually need.

What's the solution? Going back to sustenance farming is obviously impossible, but a friend to whom I once mentioned this theory suggested replacing the consumeristic bubble with a more useful one, like finding ways to address global warming. The socialist in me wants to first redistribute our excess wealth, so that everyone gets to eat before the richest (by which I include even middle America) gets a new PS3 or yacht. Whatever route we go, it'll be both egalitarian and economically stabilizing to shift our production toward artificially-amplified needs rather than artificially-amplified trinkets.

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