December 11, 2020
THE POINT OF AN ECONOMY IS TO CREATE WEALTH:
Pandemic causes Universal Basic Income? Not so weird after all. (PAUL WALLIS, 12/11/20, Digital Journal)
The sheer havoc caused by the pandemic and the massive dislocations and damage to people's lives has caused UBI to come back into focus. The UBI debate is pretty appropriate as the global economy staggers under multiple hits.Universal Basic Income is a regular payment without strings attached, unlike many Social Security schemes. The original call for UBI has been around for quite a while. It was originally raised as a remedy for poverty and wealth inequity, but the pandemic has raised the stakes enormously.Although most governments did come to the party with stimulus packages for the pandemic, criticism of those stimulus packages has been pretty continuous. The US stimulus package, in particular, was strongly criticised for not delivering enough money for long enough. Globally, the same ongoing criticisms apply in one form or another.In an unlikely twist, my own country, Australia, a poll by YouGov has indicated support for a UBI in a recent poll. What's so unlikely about it is that Australia is a typical Western nation. We tend to follow, not lead, in social reforms. To give you some idea of our social security mindset, there hasn't been an increase in unemployment payments since the mid-90s. It's not generally a major political issue for anyone.The pandemic has changed the game. It wasn't as bad here for infections and deaths, but it did involve major lockdowns for months. People were pretty lost. The financial uncertainties were real enough. Adding to this was the fact that low-income people were really hit hard. The stimulus, agreed to without dissent from anyone, did do the job of sealing the holes in peoples' lifeboats.
The generally sensible Arnold Kling is on this week's Law & Liberty podcast and provides a good overview of where the economy is as a result of Covid and offers some ideas going forward. Particularly helpful is that he touches upon, though he fails to drive home, the point that many of the jobs lost are unlikely to come back because, as events have shown, they are literally unnecessary. This begins with every job that depends on most people commuting to work every day, eating meals outside the home, business conferences, etc., and quite possibly extends to massive disruptions in how education, health care, etc. are consumed.
One of his proposed reforms as we exit lockdown is that entrepreneurship be made easier via regulation reductions and the like. This is sufficiently anodyne: we might even get Democrats to agree that licensing for most professions is just a bar to enterprise; for instance, hair-braiding and nail salons could be easier to open without much risk of harm. But he also presents a completely mistaken view of what an economy is and what entrepreneurs do: he notes that employment is down 6% from its prior levels and says that new businesses should be forming to take advantage of that excess labor. This could not be more wrong.
With the incredibly rare exception, people do not start new businesses in order to provide jobs, but to make profits. what is one of the main challenges in this regard?: costs. What is often a primary cost?: labor. What is one of the main ways you can undercut competitors in business?: run yours with lower costs so you can charge lower prices. So if you are an entrepreneur looking to start a business next June what is the one thing we can predict with near absolute certainty?: not only will you be looking to maintain the lower labor cost you possibly can, you will likely succeed to the extent that you have lower labor costs than your competitors. Not only is it not your cause to create jobs in your own business; the reduction of labor in your industry will be one of the effects of your mission.
Nor is it the case, as some like Mr. Kling suggest, that there is currently an under-employment situation (crisis), instead we are coming out of several decades of massive over-employment and returning towards normal historical levels. Civil rights legislation and the women's movement drove an employment bubble as white men hired additional employees for social reasons without ever laying off other white men. This explains, in its entirety, the perceived decline in productivity of the past few decades. But now we have reached the point where meritocracy has been restored and white men are having to compete for jobs (and educational opportunities) with all comers and, inevitably, they can no longer maintain their dominance. Given the new reality, we should expect employment levels to subside back towards the norm.
It is, likewise, this new reality that drives much of the Trumpist psychosis with its seething hatred of women, blacks, Latinos, Asians, etc. We could be big men when we could feel patronizing about quota hiring, much harder to look around a campus that's mostly female with large components of Asians and the like; a campus that was our safety school in the first place. And to not get that job because a more qualified not-white-male got it and to report to a boss who is not "one of the guys" can be emotionally devastating for some men. No wonder many are just dropping out of the workforce altogether and watching ONAN while sucking down oxy.
This fear of our ability to compete in a free economy is what drove the Tea Party--which was overwhelmingly white and male--and Trumpism--ditto. We are the welfare queens we were warned about and we want it. There is an existential terror that empowered minorities will turn the tables and transfer money from our social welfare checks--unemployment; Medicare; Social Security--to their own cohorts. That is why the reaction was so pronounced when a black man was elected president. some of our conservative brethren liked to fool themselves into thinking that the Tea Parties were a wholesome response to deficits--which is laughable on its face--when polls consistently showed that they opposed any cuts to "middle class" entitlements, which is where you could make meaningful cuts. This was just another instance of old white people chasing Dan Rostenkowski's car and banging on it with their crutches at the thought of taking any responsibility for themselves.
This leaves us with the great irony that UBI is not only inevitable but will be a function of white men demanding it. While we kept our own employment rates artificially high, we could look down upon those who obtained their livelihoods from the political system instead of the economic. Now that the shoe is on the other foot, we join the demand. And, as discussed above, this demand will only accelerate as economic factors--the technological ability and profitability requirements of the bottom line--drive employment rates ever lower.
source: tradingeconomics.com
Posted by Orrin Judd at December 11, 2020 8:16 AM