George Rebane

Our economy is supposed to be on the mend, having been stimulated from one end to the other, with another insertion on the way.  But jobs are not on the leading edge of these recoveries.  In fact, not only will employment lag, but as most of you know (at least from these pages), it will come back as a different animal.

The Bureau of Labor Statistics projects job recovery will look like a dumbbell – lots of demand for high salaried workers (with smarts), lots of demand for low salaried workers (smarts optional), and low demand for everyone else in the middle.  Unfortunately it’s the middle where most people work and get the paychecks that propel our consumer driven economy.

The middle paying jobs include our ever-shrinking manufacturing sector that has suffered a productivity pandemic for the last three decades – technology and off-shore workers are doing more for less than our unionized manufacturing labor pool.  The BLS says that America’s recovered workforce is going to be 95% in service and information related industries.  And because of educational barriers, it will be more difficult for the lower end workers to develop skills that add enough value to their services to command higher wages.

Now the socialist has an immediate solution to this problem, just mandate a higher minimum wage or introduce wage/price controls.  The ideologically unblinded know that such responses just speed up our country’s jump off the economic cliff.

There is no doubt about it, even the feds are beginning to agree that a systemic change is under way for all our labor markets, and it is powered by technology advances along with the Great Doubling of the world’s workforce.  Politically correct hot air has nothing to offer the unemployed mid-range workers.  As I have written before, the only solution is a more efficient form of wealth transfer than the government can manage.  (Please see the Non-profit Service Corporation here)

Green jobs, the latest palliative for the people, will further ravage the job markets by artificially distorting those markets to pay workers for value not delivered.  Unfortunately, by the time California’s AB32 and the feds’ Cap n’ Tax (Waxman-Markey) energy killing programs reveal their true impact, the damage will have been done.  Just pay attention to all the state legislatures out there creating ‘permanent’ green jobs with temporary federal stimulus checks.

The bad part is that the longer the federal and state governments continue to meddle and prevent true wealth creation and its efficient redistribution from happening, the less likely it will be that we will recover as the constitutional democratic republic we were when all this started – remember the “fundamental transformation” in store for us?  Neither the Democrats nor the Republicans have given any evidence that they have a solution.  But the Democrats do seem to understand that there is a mass of unemployables out there who can be effectively lied to, and who can be fed only by means of forced transfer payments.  It is these voters who stand ready to bring on a fearsome new world if they see themselves abandoned.

However, we are attempting to do something to fill the ranks of innovators and entrepreneurs, ranks that not enough of our Johnnies and Janes deem worthy of their efforts to fill.  The government has started the ‘EB-5’ visa program to entice such creative foreigners in technology related areas to stay here instead of going home or someplace else to build their businesses (more here).  On the other hand, the H1-B visa program to attract smart people to our shores still languishes with low quotas maintained by a Congress worried about … , actually I have no idea what those dolts are worried about.  Expanding H1-B is a no-brainer which still seems to be a hurdle too high for our Capitol Hill honorables.

Finally, more economists are discovering that the Hoover and FDR programs of the 1930s made a recession into a depression and kept it there.  Here is the latest from an announcement for a presentation to be given this Friday (8jan10) at UCLA’s Marschak Colloquium by economist Dr. L.E. Ohanian.

“THE GREAT DEPRESSION, ECONOMIC POLICY, AND LESSONS FOR TODAY’S ECONOMIC CRISIS” – Abstract

What started the Great Depression, and why did it last so long? This lecture provides a new explanation for these questions based on changes in government policies that significantly distorted the basic forces of supply and demand.  Presidents Hoover and Roosevelt both adopted policies that promoted industrial cartels and limited competition, and also significantly increased wages above their normal levels. By restricting the forces of competition, Hoover’s and Roosevelt’s policies substantially reduced employment and output. My research suggests that these policies are the main reason why hours worked per capita declined nearly 30 percent between 1929 and 1933, and remained 25 percent below normal a decade after the Depression had started. In the absence of these policies, the Depression would instead have been a recession with a rapid recovery. I also distill from this research broader implications for the importance of economic policies towards labor markets and monopoly for our current economic crisis, and what types of policies can foster a fast recovery.

In May 1939, after the second catastrophic dip in that double dip depression, FDR’s Sec Treasury (1934-45) Henry Morgenthau testified to Congress that, “We have tried spending money. We are spending more than we have ever spent before and it does not work.  And I have just one interest, and if I am wrong … somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises … I say after eight years of this Administration we have just as much unemployment as when we started … And an enormous debt to boot!”  As we know, the solution to the world’s economic problems was to arrive on 1 September 1939.

I am reminded again of the counsel to governments from one of the world’s great 20th century economists, Ludwig von Mises, “Do nothing, sooner!”