Education-Technology Inflation

SUBHEAD: The incentives embedded in high-technology and higher education are perverse.

By Steve Ludlum on 27 October 2010 in Economic Undertow -  
(http://economic-undertow.blogspot.com/2010/10/worker-inflation.html)

 
Image above: Robotic agricultural technology. From (http://www.informationweek.com/news/mobility/showArticle.jhtml?articleID=200900618). 

Bruce Krasting notes Planet Bernanke has gotten so much pushback from his leaked monetary policy initiatives he's now has cold feet. Quantitative Easing (QE... that is Fed buying debt) is the gift that never quits giving. Markets have been thinking that bad economic news is good news for investors. Bad news has propelled more free central bank money to be swapped for worthless stocks and mortgage-backed securities ... Sez Bruce:
"Mr. Bernanke has used the analogy of a golfer with a new putter: Unsure how it will work, he finds best strategy is to tap lightly at first and keep tapping until the golfer figures out how best to use the putter.
A putter? Does Mr. Bernanke think this is a game he is playing? He is saying that he has never putted before, has no clue how to do it, so it it is best to tap lightly? What kind of monetary policy is that? "Learn as you go", (This) does not make me feel that there is much hope."
Uh, Bruce, there really IS no hope ... Meanwhile, Tom Friedman at the New York Times has taken a few moments to spam (http://www.nytimes.com/2010/10/27/opinion/27friedman.html) a National Academy of Sciences report (http://download.nap.edu/cart/deliver.cgi?&record_id=12999) which suggests there is no hope but some better education would help. The report in turn is spam for those that pimp technology: the military; video game; entertainment; medical; and personal 'distraction' industries. The NAS is the massive organization that is the validator for the tech ideas. The report itself is a free download with email. Like Krasting's short bit-it is worth reading if only for comic relief :
The Gathering Storm report concluded that America was in substantial danger of losing its economic leadership position and suffering a concomitant decline of the standard of living of its citizens because of a looming inability to compete for jobs in the global marketplace.
One really does not need to go further. The report suggests more high-paying technology jobs are desirable. Okay, observable reality indicates an inability of Americans to compete with the Pedroes of the world in the all-important leaf-blower segment! In 21st century America, only low-wage service and retail jobs are desirable to employers as the retail and marketing sectors are where the money returns remain. It is cheaper to produce where costs are lower; it is easier to hire sub-continental skill at $25 a day rather than expense learning in this country at $4 million per worker lifetime! (http://www.earnmydegree.com/online-education/learning-center/education-value.html) Without the cheapness the all-important American companies go out of business:

Lifetime Earnings for Full-Time Employees Average earnings (in $millions) for different levels of education. Source: U.S. Census Bureau, Current Population Surveys 1998-2000.

Professional Degree
$4.4
Doctoral Degree
$3.4
Master's Degree
$2.5
Bachelor's Degree
$2.1
Associate's Degree
$1.6
Some College
$1.5
High School Grad
$1.2
Some High School
$1.0

The error is in thinking the addition of more $4 million-dollar men and women will automatically generate an increase in final demand and purchasing power. The theory is education is 'magic' to make the economy go! On the contrary, adding more workers is a form of 'inflation' which devalues the worth of each worker. As is the case right now, college educated cannot find leaf- blowing jobs yet are saddled with enormous debt burdens ... burdens accepted to gain for themselves what is proving to be worthless. There is a reason people are choosing not to be engineers or scientists. It's a hiring dead end.

What matters is return, on the education, on the companies that would hire the education, upon the companies' output and upon that output's effects on the business environment as a whole. The problem is diminishing returns on the output of productive business worldwide. This phenomenon can be seen in the public employee sector. Employee costs are so high the sector is imploding. Analysts suggest that public employees are not 'productive' but this is not so.

Private sectors cannot function efficiently without the services provided by the public sector including law enforcement, courts, property records, highway and road maintenance along with the education service pimped in the NAS report! Unfortunately, there are no sub-minimum wage substitutes for public employees. Oxnard cannot sell its firefighters to China. It must either pay or do without services. This is deflation in action. Sticky costs such as contract- constrained wages cannot be afforded by those who rely on the services provided. Renegotiating the costs takes time. The time costs plus the money costs accrue in the interval of renegotiation.

The outcome is galloping expenses that cannot be rendered affordable under any set of circumstances leading to liquidation. This is taking place right now in almost all 50 states. How much would it cost in time and lost 'productivity' to switch the school system of any state from public to private? How much would it cost in money? The infrastructure to enable such a change does not exist. That deficiency would impose more costs.

These costs when added would press on a community that lacks sufficient returns on its commerce to carry its current costs. Technology itself is possessed of its own significant structural shortcomings. The iPod cannot compete with the productive capacity of the simple vacuum cleaner invented a hundred years ago. The vacuum saves trillions of cleaning hours per year while the iPod wastes an equivalent amount of labor hours.

The great inventions of the late-19th century will not be redone. There is no tech equivalent for the Otto or Diesel cycle internal combustion engines, for the airplane, the locomotive, the steamship, the telephone or flush toilet. Adding more tech adds more costs which cannot be paid by the products themselves but must be submerged within the productive capacity of the 'legacy' economy. The productivity of vacuum cleaner users supports the iPod industry.

iPods are not productive in and of themselves. They and similar gadgets are proxies for energy waste. Wages not paid to immigrant leaf blowers are excess which is directed toward tech gadgets. As the costs of using vacuums and leaf blowers increases, the legacy economy shrinks, the earning power of tech evaporates. Like Krasting sez, no hope! The entire focus of the world's decision-making and policy mechanisms has been and is to strengthen finance and reward finance employment. Governments playing currency and interest rate games are hedge funds. Productive companies, even in China are also hedge funds.

Money making money is the job of the world. There is less of a productive 'there' there. It costs more and more to bring real products to markets. Part of this is increasing startup costs. Engineering high-tech products is very expensive along with the tech demands of production itself. China's 'investment' in educating its multitudes is good for the sake of liberalizing the collective Chinese mind but is not a business investment. The end users for what products these multitudes would provide are together a fading enterprise, being too expensive. One reason being the cost of educating these end users.

China succeeds because of its vast pool of uneducated workers willing to work cheaply rather than a pool of expensive labor that cannot afford to take a job that doesn't repay the cost of training. Labor at any price competes with energy hungry dumb machines. This is industrialization's fundamental dynamic, it propelled Europe's manufacturing jobs to America then America's to China and Mexico. Adding smart machines and smart employees is unprofitable to business, otherwise America with its expensive employees and automation would be the world's manufacturing center, not China.

Arguments can be made regarding this but the facts speak for themselves. Production is declining relative to finance is because most if not all modern goods are energy waste-enablers. The increasing cost of energy inputs diminishes the ability of the products to 'earn' an energy payback in money terms. This is the dynamic behind the current crisis. Energy costs are taken right out of business product, and worker earnings. The 600% increase in crude costs since Peak Oil in 1998 has been a business profit death angel. Unless technology can undo physical laws such as entropy it is helpless!

Because of cost, making products more efficient energy users by engineering - using high cost engineers - makes them inefficient money makers. It's a zero-sum operation. Even as the money sector shows various pitiful gains and costs, etc. the natural resource 'bank' continues to hemorrhage. By means of shabby accounting and outright lies we fool ourselves along with the National Academy of Sciences and Tom Friedman who in turn complete the cycle of fools by validating nonsense as fact.
"When scientists discovered how to decipher the human genome it opened entire new opportunities in many fields including medicine. Similarly, when scientists and engineers discovered how to increase the capacity of integrated circuits by a factor of one million as they have in the past forty years, it enabled entrepreneurs to replace tape recorders with iPods, maps with GPS, pay phones with cell phones, two-dimensional X-rays with three-dimensional CT scans, paperbacks with electronic books, slide rules with computers, and much, much more. Further, the pace of creation of new knowledge appears by almost all measures to be accelerating."
Which avoids entirely the baleful effects of ever-increasing numbers of humanoids. With tech or without the machines cannot grow returns fast enough to compete with human baby-making along with baby-making's tech enablers. The incentives embedded in tech are perverse. The only things tech can do is come up with ever more efficient ways for humanoids to kill each other or to produce more humanoids.

This smears the human misery component across a larger field of measurement. Fast food and 'technology' will kill more people than genomic engineering will ever save. The simplest and lowest cost approach to tech is to demand it pay for itself! Take away its energy subsidy and demand tech stand on its own without cheating.

Let tech compete with other solutions. The direct route to human health is agriculture reform, adding millions more competent organic farmers and removing the high-stress, toxic, money-centric rat race from the food cycle. It's hard to get the NASA or Tom Friedman to endorse this simply because it lacks the fashionable sex appeal of tech ...  

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