Once Again, Slow Economic Growth Is NOT Due To Fewer People

Like a bad penny that just keeps bouncing back, bad memes can do the same though they've been shown over and over to have no ballast, no support. One such meme is the one that insists our slow economic growth is because we have slow population growth. This is the most cockeyed non sequitur among countless others that infest the brains of the Neoliberal econ gurus, pundits and other gasbags.

In this case the meme returned in a recent WSJ piece:'A Hidden Risk of Slow Growth' (Sept. 21-22, p. B14) wherein we read:

"In the future economic growth is expected to be slower still. One reason why is that population growth is slipping so the pool of available workers isn't expanding as fast as it used to."

However, this is a non sequitur and certainly if those same workers are essentially being paid no more per hour than they were 45 years ago. Fiat wages, which means limited spending and disposable income - whether for a mortgage or even a used car. So it makes no difference how many more people one has, or how large the pool of available workers is, if their wages remains stagnant.   Why is this so hard to grasp?

The piece also resurrects another "reason" for current and future slower growth, but which is actually a Macguffin:

"The other reason is that improvement in productivity  - how much workers produce per hour, on average- has slowed markedly since the early 2000s."

And why is this?  Northwestern University's Robert Gordon argues, and he's correct, that by the time the digital revolution got under way- say in the 80s- the big payoff in productivity began shrinking. Meanwhile, the PC-computing payoff basically has "come and gone" dissipating by 2004, when EROEI reached below 10:1.

Energy efficiency continues to decline and yet the econ genii still can't fathom why labor productivity is in decline, nor identify the things gov't can do to slow it. For the worker himself, any such claim is taken as nonsense because he is working harder than ever and merely treading water. 

Less noted, but an equally important factor is how productivity is gauged. We are informed that labor productivity is tied to economic growth, i.e.  the GDP. The GDP in turn is dependent by nearly a 75% proportion on consumption. The growth "rate" however seems to basically be stuck at 2 percent per year and no more.

Is this all bad? And what is the root cause?  A major clue was provided over 20 years ago by authors William Wolman and Anne Colamosca  in their (1997) book,  The Judas Economy: The Triumph of Capital and the Betrayal of Work'.  Therein we learn that productivity in relation to GDP has increased more than 40% in the interval since 1973 even as wages-salaries have remained almost stagnant.

From this it emerges that labor productivity is ebbing because wages have stagnated so workers have not been able to earn enough to spend - to contribute to the 75 percent consumption part of the GDP equation.  The inherent problem then appears to be tying labor productivity to economic growth.   In a September 5, 2016 TIME essay (p. 20),  columnist Rana Foroohar reinforced this aspect by noting:

"Nobody is suggesting that productivity isn't rising because individuals aren't working hard enough. On the contrary, most economists believer the American blue and white collar workers alike are firing on all cylinders."

So what the ivory tower economists, or WSJ nabobs are really telling us when they bitch about "moderate productivity" or "labor productivity too low" is that it isn't being translated into economic growth. But that elicits the question, why not? The answer again, is because workers are not being paid enough to purchase most of the goods they make.  Unless it's via credit card debt, of course.

It doesn't take a rocket scientist or math whiz to figure out the disposable income available to those with the lower incomes (than $37,000/ yr.) would not entice them to spend on very many things - whether goods (e.g. new HDTVs, cars) or services (dining out). Hence, to avoid overstocked warehouses companies must cut production of goods. This in turn leads to a problem with aggregate demand.

Aggregate demand is composed of two parts: 1) demand generated by consumers for goods and services, and 2) the demand for investment goods. When the level of aggregate demand is high, both these components are generally equally high, and the levels of production and employment are high. On the other hand, when aggregate demand is low - or even one of the components (e.g. (1)) is very  low, then levels of production  plummet.

The takeaway is that population increases will not solve the slow economic growth issue, nor will making workers push harder.  What is needed is much higher wages - basically a living wage (I reckon at least $25.00/ hr.) so citizens can afford a decent roof over their heads, adequate food, and access to medical care that doesn't bankrupt them.  But because the Neoliberal financial system views these as having too exorbitant  a cost  via -a vis capital it will never implement them - or allow a politician to be elected who might (say by raising taxes).  

The result? There will never be higher economic growth than 2.0 percent.  In addition, the primary index for inequality, the Gini coefficient, will continue to increase - as it has just recently (from 0.482 to 0.485).  The reason is that the Neoliberal system has zero interest in implementing the changes that could reverse its direction, i.e. Bernie Sanders 8 % tax on wealth. 

American Workers Still Lashed To The Productivity Treadmill - Wage Stagnation

In a WSJ piece from five days ago on declining worker productivity, we learned that "productivity growth, though volatile in the short run has slowed markedly since the information technology fueled boom of the late 1990s and early 2000s." Why is this? Why are American workers, though they are underpaid and work more hours than ever before,  still held to unrealistic productivity standards by the economic pooh bahs and gurus?

 Northwestern University's Robert Gordon has posited that the Industrial  Revolution (at the turn of the 19th century) had a vastly bigger effect on productivity, economic growth than the so-called "PC revolution" in the 20th. Think about it! The former meant transition from the impossibly laughable energy of whale oil to kerosene, coal etc., a mammoth jump in the EROEI of available energy sources. The latter transpired over a period of roughly 20 years over which the EROEI of oil actually decreased from 16:1 to roughly 10:1.  Translation: More work over more hours was needed to get the same 'bang for the productivity buck.'

Little wonder wonder that even millions of computers were not able to match the sheer change in productive output that accompanied the Industrial Revolution- and within the scope of the latter's purview we include the internal combustion engine, electricity, and indoor plumbing.  Gordon argues, and he's correct, that by the time the digital revolution got under way- say in the 80s- the big payoff in productivity began shrinking. Meanwhile, the PC-computing payoff basically has "come and gone" dissipating by 2004, when EROEI reached below 10:1.

Energy efficiency continues to decline and yet the econ genii still can't fathom why labor productivity is in decline, nor identify the things gov't can do to slow it. For the worker himself, any such claim is taken as nonsense because he is working harder than ever and merely treading water.

Less noted, but an equally important factor is how productivity is gauged. We are informed (WSJ, op. cit.) that labor productivity is tied to economic growth, i.e.  the GDP. The GDP in turn is dependent by nearly a 75% proportion on consumption. The growth "rate" however seems to be stuck at 2 percent per year and no more. Indeed, in a number of quarters since the credit meltdown we've barely seen 1-1.5% per year. In addition, we've been informed (op. cit.):

"If labor productivity grows an average of 2 % per year average living standards for our children's generation will be twice what we experience... If labor productivity grows an average of 1 % per year, the difference is dramatic. Living standards will take two generations to double."

Is this all bad? And what is the root cause?  A major clue is provided by authors William Wolman and Anne Colamosca.in their (1997) book,  The Judas Economy: The Triumph of Capital and the Betrayal of Work in which we learn that productivity in relation to GDP has increased more than 40% in the interval since 1973 even as wages-salaries have remained almost stagnant.

From this it emerges that labor productivity is ebbing because wages have stagnated so workers have not been able to earn enough to spend - to contribute to the 75 percent consumption part of the GDP equation.  The inherent problem then appears to be tying labor productivity to economic growth. TIME economic columnist Rana Foroohar reinforces this aspect by noting (p. 20, Sept. 5, 2016):

"Nobody us suggesting that productivity isn't rising because individuals aren't working hard enough. On the contrary, most economists believer the American blue and white collar workers alike are firing on all cylinders."

So what the ivory tower economists are really telling us when they bitch about "moderate productivity" or "labor productivity too low" is that it isn't being translated into economic growth. But that elicits the question, why not? The answer again, is because workers are not being paid enough to purchase most of the goods they make.  Unless it's via credit card debt, of course,

Is this poppycock? Let's delve into it further. Half of the jobs in the U.S. currently pay less than $18 per hour, according to Labor Department data. That's about $37,000 a year - assuming someone works full time. Meanwhile, forty percent of jobs pay less than $15.50 per hour according to the Economic Policy Institute. How far do such incomes go?

In the Denver area the average rent is currently $1,350 a month. Not including utilities that would be   over 50 percent of $2620, the monthly income after taxes, for the earlier class of worker named above.  In terms of home ownership., 6 of 10 homes in the Denver area are over $400,000. The annual income needed to qualify for a mortgage for such a home - assuming a 10 percent down payment and 4 percent interest rate - would be $94,000 a year.  This is over two and a half times more income than half the jobs in the U.S. currently pay.

It doesn't take a rocket scientist or math whiz to figure out the disposable income available to those with the lower incomes (than $37,000/ yr.) would not entice them to spend on very many things - whether goods (e.g. new HDTVs, cars) or services (dining out). Hence, to avoid overstocked warehouses companies must cut production of goods. This in turn leads to a problem with aggregate demand.

Meanwhile, we learn hourly earnings for private sector workers "increased 3 cents last month to $26.39 an hour."  This is better than more than half U.S. workers but still not sufficient to rent an apartment or get a mortgage for most homes in Denver. Not to mention, Miami, LA and San Francisco.

Aggregate demand is composed of two parts: 1) demand generated by consumers for goods and services, and 2) the demand for investment goods. When the level of aggregate demand is high, both these components are generally equally high, and the levels of production and employment are high. On the other hand, when aggregate demand is low - or even one of the components (e.g. (1)) is very  low, then levels of production  plummet.

Quick and stupid fixes will not solve the situation. Thus, Columbia Business School Dean Glenn Hubbard (the guy who conceived the Bush tax cuts) and his "solution" of "rolling back regulations" (WSJ, op. cit.) will not increase productivity. It will only make more workers ill when they drink degraded water or get exposed to harmful chemicals because regulations (read protections) have been eviscerated.

A more sober and sensible take (ibid.)  is provided by Federal Reserve Vice Chairman Stanley Fischer who observes that policies work best when areas are addressed that the private sector neglects. These include: "investment in basic research, infrastructure, schooling and public health"

Imagine how much more productivity could be improved if roads, bridges were properly maintained - existing ones with issues repaired- enhancing manufacturing to retail outlet times. Imagine also how it could be improved if workers' health was improved, causing fewer work days missed.

The only way in the meantime to increase productivity tied to economic growth is for employers to increase worker wages. They can then  achieve greater purchase power, and a higher standard of living and keep those warehouses filled with product.  This is even more critical now given the weakening of the dollar's value. As per John Tamny's WSJ article ('Trump Is Wrong - A Weak Dollar Doesn't Make Strong Economy', Aug. 9, p. A15):

"American workers are paid in dollars. Devaluing the currency erodes their ability to buy the necessities and pleasures of life, whether they're created across the street or on the other side of the world. This obvious truth has long eluded proponents of a weak currency who are prone to limiting their analysis to first stage implications".

In like manner, one could say the obvious truth of hiking worker wages to enhance productivity (as currently defined) has also eluded the proponents of low wages - who are only obsessed with controlling inflation.   But as Mr. Tamny also writes, applicable here as well:

"The reality, seemingly ignored in the discussion of economic growth is that workers produce in order to consume. The making is all about the getting."

But what if the connection is ruptured? Then so also is labor productivity ruptured from GDP and economic growth.  In this case we may have a more objective measure for productivity not based so much on worker consumption.

For now, because wages are so stagnant, workers are again tapping homes for cash (WSJ, 'Tapping Homes for Cash Is Back', Aug. 28, D1) and maxing out with credit card debt.  ("Home equity line originations rose nearly 8 % to almost  $46 billion in the 2nd quarter- the highest level since 2008".)

In addition, too many American workers now appear to have '"settled" meaning they've lowered work satisfaction levels to the bare minimum or close to it (WSJ, 'Expecting Less Jobholders Cheer Up',  Sept. 2-3, p. D1).  Thus we learn:

"A decade of bruising job cuts, minimal raises and lean staffing has led workers to lower their expectations."

Also:

"The average employee today shoulders more risk for retirement and health care than in past generations, and enjoys less job security.."

Meanwhile, Donald Trump has proposed massive corporate tax cuts, i.e. effectively for the CEOs, companies, while trying to make employees believe this will translate to a few extra nickels for them.  
More than ever, Dems need to make the case that American workers need support, and also expose Trump's idiotic tax "reform" plan for what it is - sheer exercise in fantasy.  I will have more to write about this and why his idiocy now presents a "red flag" to the bond market.

Stay tuned!

See also:

http://www.smirkingchimp.com/thread/peter-dreier/74936/this-labor-day-remember-that-martin-luther-king-s-last-campaign-was-for-workers-rights

Another Bloomberg 'Genius" Falls For The Myth That The U.S. Needs More People

Let's put it right out there in the open, that this country is bloody crowded with people. Here in Colorado if you decide to go to the mountains or Rocky Mountain National Park any given weekend, you are doomed to wait hours in long lines on the I-25. If you're in Miami or LA the highways are backed up 16 lanes with traffic almost all the time at peak hours. Here in Colorado Springs. unless you make reservations for most places - even 'Mom n Pop' cafes- you're likely to be out of luck. And woe betide you if you have to use an ER, you may wait for hours.

SO on basic observation the claim this country needs more people is bollocks. But here again, the economic eggheads who think they know better than anyone else, are convinced Americans need to make more babies given our decline in birthrate.  The latest one to make this argument is Bloomberg resident columnist Stephen Mihm whose piece 'Baby Bust!'  appeared in The Denver Post (front page Sunday 'Perspective', Jan. 8 )  He writes:

"Shortly before Christmas, the U.S. Census Bureau put some coal in the nation’s holiday stocking. It released data highlighting a worrisome trend: The population grew a subdued 0.7 percent, the lowest rate of growth since the Great Depression years of 1936 and 1937. Declines in the birthrate and the slowing pace of immigration are to blame.

Ask an economist why this matters, and you’ll get a welter of contradictory answers, as the relationship between population growth and economic expansion is a vexed and controversial subject. But if you sift through the historical data on the subject, it’s hard to deny that the demographic slowdown, should it continue, likely puts a damper on future economic growth."

Okay, two quick points to make at the outset. If the central argument is that the economy "needs more people" - which appears to be the case- then Mihm has already admitted (1st paragraph) that the cause need not be low birthrate, but  rather slowing immigration. This elides into another point I've made consistently in these economic arguments: that the world as a whole is overpopulated but any given nation per se may not be overpopulated. Thus, the world has more than ample people, but with different densities in different nations, regions. Hence, less densely populated places can make up for any perceived economic consequences by simply allowing more immigrants into their nations, while not increasing global population. I know this isn't popular with all the Reich wing populist nuts like Le Pen and Trump, but there it is. THAT is what you're going to have to do in an already overpopulated world.

In the OECD nations right now there are well over 230 m unemployed thanks to a combination of reasons including corporate restructuring, automation - and offloading jobs to cheaper nations.  So rather than add to the world's population burden (and the attendant environmental problems)  why not put these current unemployed back to work wherever needed? Make them 'citizen workers of the world' - since the whole market impetus is to globalization anyway.

Second, Mihm - like most of his economist brethren - misses the mark believing population is the major factor impacting economic growth. No, it is not. As I've noted before (Sept. 20, 2013), it is the decreasing energy return on energy invested (EROEI) of fuel sources. In other words, our energy-dependent civilization is becoming ever more impoverished as the efficiency of the energy to run it diminishes over time. Essentially, a nation which had become addicted to energy delivering 20 to 30 or even 40 times as much energy as it cost to extract, now faces a future with energy return 5 to 8  times less. This spells monetary-economic disaster because at the end of the day it is energy which  determines wealth of nations- money is only a medium to represent it.

A report issued by the London investment firm Tullet Prebon as recently as five years ago, and circulated via 'Strategy Insight' newsletter warned:

"For 2020, our projected EROEI of 11.5 to 1 is not as catastrophic as 5: 1 but would nevertheless mean that the share of GDP absorbed by energy costs would have escalated to 9.6% from about 6.7% today. Our projections further suggest energy costs would absorb as much as 15% of GDP (at an EROEI of 7.7 to 1)  by 2030."

This shows the trend in a nutshell and it has nothing to do with population, only that increasing it globally would make matters worse because all those added people would require much more energy to live, including for fuel, food cultivation, transport etc.. And 2b more are expected by 2030.

Again, this shows the problem is not too few people but too many and the core sane solution is to redistribute them for economic maximization. This as opposed to insisting all the more developed nations have more babies.  Not to sound too hyperbolic, but that's kind of like tossing cans of gasoline on a slow burning fire.

We don't need it. But don't try to tell that to these economists! Mihm goes on to admit, however:

"these declines in the birthrate — and the larger rate of population growth — weren’t bad news in and of themselves; if anything, they seem to have been quite positive, going hand in hand with dramatic economic growth."

Well, this is not really surprising given that it costs a hell of a lot to raise a kid from birth  As per a Denver Post Business story ('Discovering What It Costs To Raise A Child') from Jan. 3rd, 2013 (p. 5K) we learn an "average middle class family will need $245, 340 over 18 years, for a child born in 2013"(From a U.S. Dept. of Agriculture 'Cost of Raising A Child' report).   And this is bound to be more expensive in the future as medical expenses will rise, and health care is much more difficult to afford (thanks to the GOP).

That chunk of moola, nearly a quarter million or what each retiree needs to cover medical expenses Medicare doesn't,  includes: "diapers, formula, child care, baby furnishings, new clothes every year, electronic computers, smart phones...and other gear and seemingly don't end when the young one finds a job".

So it's no wonder economic growth would rise if that albatross was removed from many couples' necks.  Additionally,  recall this pullback is being done in an energy environment which is regressing in terms of efficiency.  Northwestern University's Robert Gordon has posited that the Industrial  Revolution (at the turn of the 19th century) had a vastly bigger effect on productivity, economic growth than the so-called "PC revolution" in the 20th. Think about it! The former meant a transition from the impossibly laughable energy of whale oil to kerosene, coal etc., a mammoth jump in the EROEI of available energy sources. The latter transpired over a period of roughly 20 years, over which the EROEI of oil actually decreased from 16:1 to roughly 12:1. So no wonder that even millions of computers were not able to match the sheer change in productive output that accompanied the Industrial Revolution- and within the scope of the latter's purview we include the internal combustion engine, electricity, and indoor plumbing.

Gordon argues, and he's correct, that by the time the digital revolution got under way- say in the 80s- the big payoff in productivity began shrinking. Meanwhile, the PC-computing payoff basically has "come and gone" dissipating by 2004, when EROEI reached below 10:1 and fracking began as a last desperate effort to snare the vestigial ""riches" of oil - along with deep sea drilling.

We come back again to Mihm's reliance on Canadian economist Clarence Barber's study tying economic growth to a nation's population:

"In theory, immigration might have picked up the slack. While Barber didn’t address this in his study, it’s worth noting that Congress put drastic curbs on inflows of people in 1924. That year, approximately 706,000 immigrants legally entered the country. The number dropped precipitously the following year, and by 1933, the number had fallen to 23,000, a decline of almost 97 percent.
How these demographic declines set the stage for the Great Depression is hard to know with certainty, but Barber believed that the decline in birthrates among native-born Americans was sufficient to set the stage for declines in aggregate demand."

But again, I can make the symmetric argument that Barber was remiss in not factoring immigration into his work. And if this is so, then the claimed drop-offs in aggregate demand are a function of labor inputs, numbers not native birth rates.  I can vouch for my own maternal grandfather who came to the U.S. from Croatia in 1914 and had his own corner grocery operating in Depression-era Milwaukee by the mid 1920s. His business did so well he could help many native born Americans adversely affected. Hence, one cannot and must not dismiss the role of immigration, particularly in an already overpopulated world.

The solution for nations perceived to be underpopulated, then,  is to allow a larger influx of foreign workers.  To be sure, I am not elated about adding any more people to this country, because I think 300-plus million is more than enough. We already risk a large surplus labor force which can drag down pay or at least keep it stagnant. But ...if the choice is between Americans having many more babies, and allowing in more immigrants to try to enhance economic growth - I am definitely in favor of the latter!

The truth?  Increased populations only assist Neoliberal  (or conservative - like the Koch bros.) elites who can afford to live apart - in their gated enclaves- but who can profit handsomely by the vast surplus labor pools created. As investors, or even owners,  they can basically bid down wages and benefits to whatever lowball number they want, and if the peons.....errr  workers.....don't like it....they can tell them they will send the jobs to China.  Or, automate them.

In terms of providing health care to the people already residing in the U.S. this is a big deal. There is already a projected physician shortage across all specialties and at least the immigrant physicians - say from India, Jamaica, Iran etc., had been making the shortage manageable. Now, with idiot Trump's new "EO" this may be truncated, even as he's altered his "bad guys" list from 7 nations to 6 - already showing it was contrived to begin with. (Apart from which a Dept. Of Homeland Security Report from a week or so ago stated clearly no attacks of any kind came from any of those 7 nations.)

In addition, the fact that the new GOP health care plan wants to pull the rug out from underneath families shows this is not the time to have more kids. What support - health wise- will you get,  especially if your child has autism, muscular dystrophy or some other condition that demands extraordinary  medical expense?  The answer is none. So the decision not to have children  is rational in this hostile environment. One in which the majority R -party is more exercised and outraged about the unborn than protecting the health of the already born.

Oh, and protecting their financial health too while also not emulating  Jacob Chaffetz- who actually suggested if people want to afford their new Reepo health care they should not buy that new I-phone. Evidently, this monkey isn't aware that a typical premium for health care now costs $18,000 a year, compared to a few hundred bucks for an I-phone. (With blabber like this, Chaffetz is ripe for a takedown by Katherine Allen, a physician from Salt Lake City now planning to run against him.)

By the end of his piece, Mihm seems to catch a glimmer of realism but then that recedes as he writes::

"data released by the real estate firm Trulia last week indicates that the number of young people living with their parents (or siblings) recently hit levels not seen since 1940. That statistic suggests that a baby boom isn’t likely, never mind a boom in consumption fueled by the formation of new households.

But at least the U.S. still has immigration, right? Perhaps not: President-elect Donald Trump has been vocal about his opposition to illegal immigration, but since the election, he has started to send signals that he intends to crack down on legal immigration, too. If that happens, only a homemade baby boom will save us from further decline in the Trump years."

But alas, as I showed, no such "baby boom" will save us because it merely means more biologic energy "sinks" to draw on ever diminishing EROEI energy sources. In addition,  it will massively add to the debt of any families that do have more kids - given their atrocious expense- and in an environment where Repukes will be slicing all possible benefits (including healthcare) to the working and middle classes.

All it will do is speed our nation's accelerating decline, especially given the upside down economics of the Trumpites.

Did You Know The Poor Have Gained The Most Wealth In The Past 200 Years?

"You might think the rich have become richer and the poor even poorer. But by the standard of basic comfort in essentials the poorest people on the planet have gained the most....Inequality of financial wealth goes up and down but over the long term it has been reduced...by the more important standard of basic comfort in consumption, inequality within and between countries has fallen nearly continuously."

- Deirdre N. McCloskey, 'Equality, Liberty, Justice and Wealth', The NY Times,, BU-6, Sept. 4

McCloskey puts forward an interesting premise, but once one reads two thirds through her piece it becomes clear it is yet more Neoliberal propaganda based on precious little evidence.  Start with the nonsense of a "basic comfort" gauge - i.e. comparing the downtrodden masses today with those in the early 1800s living in "tents and mud huts". Are you kidding me? Is THAT really the standard for economic elevation we're going to adopt? For a professor of economics it is incredible McCloskey wouldn't appreciate fully that one must use the living standards of the time - not how the lowest were 200 years ago. Else, one ends up comparing apples and oranges, chalk with cheese.

Indeed, if the poor masses have it so great today why are they flooding Europe en masse trying every which way to escape from their lousy economic environs - whether in South Sudan, Bangladesh, Mexico, Cuba, Honduras or wherever, e.g.

African migrants congregate near Calais to try to make a break through the "Chunnel" to get to Great Britain

Make no mistake that most of these people are economic migrants, which they will admit  to if pressed. They want to get to nations where they perceive increased opportunity, never mind that may well turn out to be a mirage.  Though most attention has focused on fleeing Syrians, in fact the biggest wave is from Africa and this is no surprise because it is experiencing the biggest population explosion.

As noted in the 2015 WSJ piece, 'Humans, Lions Struggle to Co-Exist', Aug. 8-9, p. A7:

"Africa's human population is the fastest growing in the world. In roughly the same period as the lion decline (42 percent over 21 years), the number of Africans has doubled to nearly 1.2 billion people. The population will double again to 2.5 billion by 2050 according to the United Nations."

In fact, short of a global catastrophe (Avian flu, new Ebola outbreak?) , it is projected to reach 5.8 billion by 2100. That means nearly 1 of every 2 people on Earth will be African. Where will the resources be to support them? The jobs? The water? The life quality? Fact is, that population growth is unsustainable and means either vast numbers will perish, likely of disease, war or famine - or they will do everything they can to go to places with greater opportunity and resources- like Europe and the U.S.

Thomas Malthus grasped that an increasing population was unsupportable unless it had access to resources: food, minerals, materials for building, etc., beyond subsistence. He also observed this must be the case given that population grows geometrically (2, 4, 8, 16 etc.) and food production only arithmetically (2, 4, 6, 8). In effect, at some point the population growth becomes so great that the available foodstuffs can no longer support it and one has a crash or dieout.  This is a primary reason for the mass migration movement today, which is also a symptom of endemic poverty.. People understand that they have only one of two choices: starve over the long run or try to get to a place where they might have work, economic security...enough food to eat.

Already, as the preceding image shows, European locations are being swarmed by desperate Africans, from Eritrea, Uganda, Somalia, Nigeria and other countries - as well as by Syrians seeking to escape their civil war. And this doesn't include the tens of thousands also headed for the southern U.S. border, often crossing the Atlantic to Brazil then  going through to Central America. (See the recent TIME on the new migrant influx).

At the core of these human floods is one condition: overpopulation. The population of African nations, for example, is vastly outpacing the ability of those nations to provide jobs or even basic resources. And because these populations consume the scarce resources there are, it means that for their subsistence they are creating ecologic havoc.

That Niger person may not have a Chevy Grand Cherokee belching out 6 tons of CO2 a year but he or she is raiding forests (e.g. for wood to render charcoal for fuel) and thereby decimating the primary carbon "sink". All totaled, between 1990 and 2005 Niger lost 34.9% of its forest cover or around 679,000 hectares. Meanwhile, the total rate of animal habitat conversion for the same interval amounted to 25. 7 percent.

I bring population up because McCloskey as part of her Neolib PR tract  writes:

"Look at the astonishing improvements in China since 1978 and in India since 1991"

But does she seriously believe these economic improvements would have materialized without severe policies to cut back on population?  Take the case of China, for example. It rejected  the world's opprobrium  to implement  a "one child only"  policy.  It opted to do this to contain its numbers so as to strive for higher life quality for all its people. The proof 'is in the pudding' as they say, and if anyone doubts it they merely have to look at the size of China's middle class which now is vastly greater than the U.S. And when you travel to Europe, If you do, you will see Chinese tourists all over- from Jungfraujoch in Switzerland, to Bratislava, Slovakia, to Vienna, Austria and Prague.  There is NO way that many well off Chinese would be turned into globe trotters had the population policy not been changed to provide a more favorable resources to population ratio.

And let's get it straight that lower fertility rates in correlation with greater material abundance and financial status is not peculiar to China.  India by virtue of its mass sterilization policy (attributed to reducing its population by at least a half billion over 30 years)  is also such a success story. It made possible  at least a significant Indian middle class roughly on a par with China's.

McCloskey asks: "What then caused the Great Enrichment?"

And like a true believer, a true Neoliberal acolyte, she writes:

"Not exploitation of the poor but investment, not existing institutions but a mere idea, which the philosopher and economist Adam Smith called 'the liberal plan of equality, liberty and justice.' In a word, it was liberalism, in the free market European sense."

Just give them "equality before the law and equality in social justice and leave them alone", and magical things will happen. 

Which, of course, is codswallop. Because what she is referring to isn't anything other than Neoliberalism and even Adam Smith recognized the need to keep it under control lest resources get out of balance. Smith wrote in his superb book, 'An Inquiry Into The Wealth Of Nations':,

"There are needs in a civilized society that a barbaric one refuses to address" and "What improves the circumstances of the greater part can never be regarded as an inconvenience to the whole". If one reads his 2-volume work carefully, it is clear Smith is not at all exalting or proposing the distorted Neoliberal system at work in the world today. That system disavows economic security provided by the state-  and extols "free" markets ex machina, which are really coercive markets. What Smith advocated was but something more in line with Rhine capitalism.  As the authors of Capitalism vs. Capitalism have noted, the Rhine economies in the 1970s-80s (with large doses of socialist behavior) actually exceeded American cowboy capitalism in productivity for most of the 70s, 80s. Evidently, some ethic of redistributive sharing works, as even Adam Smith acknowledged in his quote above.

Thus the Rhine model of capitalism built in redistribution to benefit those left behind (say the victims of today's trade pacts)  via higher taxation, which U.S. Neoliberals disavowed. Meanwhile, Matt Miller in his book,  The Tyranny of Bad Ideas, has pointed out that all the so-called European "welfare state" economies (e.g. Denmark, Norway, Sweden etc.) fared much better than the neo-liberal, market dominated U.S. during the great recession. They provided the resources for their citizens to be more resilient, and also their higher formal tax structures prevented the sort of macro-scale deficiencies we still see in the U.S. where infrastructure is crumbling, public pensions are under-funded.

In the U.S. capitalist system, it is more rank commercialized competition that prevails - and that engenders a perpetual destruction that ravages precious resources.  These resources include higher quality (i.e. higher EROEI, or energy returned on energy invested) energy sources. Because of population beyond the bio-capacity limit, and especially higher consumption in the Neoliberal economic West, we are headed to a state of degraded energy assets, massive debt and poverty. See e.g.

http://brane-space.blogspot.com/2013/09/44-trillion-in-deficits-by-2024-minus.html

In  a small nation like Barbados, with few natural resources, each must be maximized. There isn't the quantity to allow duplication or other squandering in wasteful competition. In the U.S., the exact opposite holds. Huge amounts of resources are yearly squandered in competitive games- that have only one or a few 'winners'. In effect, the 400-odd  billionaires counted in this country have emerged at the expense of vast finite resources being destroyed forever.

McCloskey also insists we can "improve the conditions of the working class" by "raising low productivity". She claims "enabling human creativity" is what has mainly worked.  In a sense, this is true, but that enabling hasn't been consistent or equally distributed for a number of reasons. One of them is the variability of productivity owing to the variability in the energy sources to drive it.

Thus, McCloskey ignores the history of productivity advances, and what's really  been behind them. Northwestern University's Robert Gordon has posited that the Industrial  Revolution (at the turn of the 19th century) had a vastly bigger effect on productivity, economic growth than the so-called "PC revolution" in the 20th. Think about it! The former meant transition from the impossibly laughable energy of whale oil to kerosene, coal etc., a mammoth jump in the EROEI of available energy sources. The latter transpired over a period of roughly 20 years over which the EROEI of oil actually decreased from 16:1 to roughly 10:1.

So no wonder even millions of computers were not able to match the sheer change in productive output that accompanied the Industrial Revolution- and within the scope of the latter's purview we include the internal combustion engine, electricity, and indoor plumbing.  How can we attain the corresponding drivers of productivity today? We can't without new sources of energy.

Gordon  argued, and he's correct, that by the time the digital revolution got under way- say in the 80s- the big payoff in productivity began shrinking.  In this context no amount of "creativity" would matter because ultimately creativity also is contingent on energy capacity to make the new creative concepts work. Meanwhile, the PC-computing payoff basically has "come and gone" dissipating by 2004, when EROEI reached below 10:1 and fracking began as a last desperate effort to snare the vestigial ""riches" of oil - along with deep sea drilling.

What might change the equation? Well, nuclear fusion power, but don't look for it anytime soon. See, e.g.

http://brane-space.blogspot.com/2016/04/fusion-power-within-ten-years-basically.html

 The mistake the Neoliberal species called "homo economicus"  continues to make, then, is confusing advancing technology with adequate, high quality energy supply needed to actually leverage creative processes into widespread use for the benefit of all.

The Neoliberal cornucopians like McCloskey get it wrong because they don't take such factors into account nor do they see population growth for the toxin it is, and can't put 2 plus 2 together to see how it leads to the Malthusian nightmare (not necessarily on Paul Ehrlich's timetable).  All of this comes back to net energy which is that energy humans need to survive. If the oil taken from the ground, say by fracking, only has a ratio of 1:1 (for energy produced to energy consumed) then it is useless to extract it. The same amount of oil-energy you are using up to get it, is basically what it carries. There is no net gain.

It is the periodic net gains made possible by higher grade energy sources  that have allowed humans to reproduce and thrive in many places around the globe.  But there has always been a critical balance between the given energy capital and the rate of human consumption. Too little, productivity languishes, too much and existing energy sources become scarce or degraded and productivity still languishes.

It is currently the erosion of net gain (reflected in ever lower GDP)  that will eliminate a majority of  humans. Right now, with humans consuming nearly the equivalent of 1.6 Earths per year there is no way even a population of 7.3 billion can be sustained - far less squeezed into an area the size of Texas as the dimwit Bret Stephens once claimed. (WSJ, 'The Tyranny of a Big Idea', Nov. 3, 2015).
The Neoliberalism McCloskey worships only succeeds because it basically rigs itself against the citizens with fewer assets. This increases inequality, and worse, consolidates the power of the richest on the political system, especially in the U.S. This is why one can have laws which protect profiteers, such as corporations in Denver who refuse to build affordable housing because it doesn't redound to their profit demands or benefit. This leads to deplorable conditions like that shown below:
 A homeless family crowds into a corner of an Aurora, CO shelter. A food shortage at the shelter meant it had to seek outside assistance. How is Neoliberalism benefiting them?

The affordable  housing situation is so dire in the Denver area (as it is in others, e. g. Miami, San Francisco), that the city must hold a lottery every fall to award 700 to 1000. Section 8 vouchers.  Without such vouchers, a Denver resident would need an income five times the median existing one just to own a home at the median price. He or she would need three times the income to rent - given a median rent in the area of $1700/ month. Do the math for a Walmart clerk or Starbucks barista and see how that works out. And what of the 1.5 million Americans who live on only $2 per day, as reported in Project Censored's No. 5 most concealed story?  (Colorado Springs Independent, Oct. 26- Nov. 1, p. 24)

Here in Colorado Springs the  affordable housing situation isn't much better. The median home price at $262,500 - while less than Denver's ($345,000)  - is still beyond the reach of service sector workers. The mean apartment rent has spiked to $991/ month,  leaving many others in the cold.

What is Neoliberalism doing to rectify this situation? Well, nothing, because as McCloskey writes it's premise is "to leave people alone once laws for social dignity" are in place, oh as well as "equality under the law" (as I've shown, a total farce, given it doesn't exist in practice).  If the laws themselves are predicated on coercive markets instead of genuine free markets, this is a myth. To quote Charles Reich, Opposing the System, Crown Books, 1995, p. 22:

"A free market produces results that favor the health of society as a whole, because an essential balance is maintained. But in a coercive market, the balance is destroyed, the earning power of work and the standard of living of workers declines, and society as a whole is devastated while those with economic power gain an ever more unbalanced share of the nation's economic wealth."

Adam Smith, if he saw McCloskey's paean to the Neoliberal idiom would be turning over in his freaking grave.

The Productivity Conundrum Surfaces Again

Ask nine of ten economists what is the biggest controversy today, and apart from whether or not the Fed will keep raising interest rates, they are likely to respond "Productivity!"   In other words, is it really decreasing or is this merely a figment of our measuring tools and perceptions?  Never mind the ubiquitous smart phones and apps which facilitate most of the mundane actions of our lives, the BLS (Bureau Of Labor Statistics) keeps insisting that productivity is declining and has been over the last decade.

As TIME economic columnist Rana Foroohar observes (p. 20, Sept. 5):


"The BLS numbers are a big deal. With birthrates falling and immigration down, productivity needs to go up or we'll soon be worse off economically than our parents."

Foroohar goes on to assert that "the slowdown in productivity is now widely seen as one of the big factors in America's tepid recovery."

But I already put forward subtle physical reasons for this, namely that one can't reduce productivity simply to human labor but also to the quality of energy used to expedite that labor. This includes a whole spectrum of machines as well as the fuel- sources they need to run on.

What we already know, and this isn't even up for debate, is that the EROEI or energy returned on energy invested, has been steadily decreasing for almost two decades.  In the case of oil alone, what used to engender an EROEI of 16:1 to 19:1 several decades ago is now headed for 5:1. This means less efficient energy use and by extension less efficient use of human labor to produce whatever products or services are needed by a complex, mainly industrial economy. Take everything from MRI machines, to automobiles (and auto factories) , to passenger jets, a lower energy EROEI means a lower productivity for the manufacture of all of the above, because it takes much more energy to produce each unit.

Based on this, one sees that the retirement of higher skilled Baby Boomer workers is not fully to blame for the situation, nor is it the more laid back lifestyle choices of many millennial workers. Even if the Boomer workers remained on the job and the millennials all turned into workaholics it would not solve the problem and increase productivity.

Why isn't digital technology making a productivity difference? The basic reason is that no matter how much digital gizmos a company has if they lack access to higher EROEI sources they will still remain behind the productivity eight ball. And as author Matt Savinar has observed, ultimately all those digital apps, laptops, etc. depend themselves on the quality of the energy sources - as anyone can attest to when the power goes out.

The mistake "homo economicus"  continues to make, then, is confusing advancing technology with advanced energy supply. The point Savinar made ('Life After the Oil Crash') is that no amount of computer or other technology will make a dime's worth of difference if there isn't adequate energy to run all those devices on.

Just consider for reference the monumental snafu that occurred when Delta commercial planes across the nation were brought to a halt because their central ticketing  and coordinating center in Atlanta went down. This was ultimately traced  a blown electronic component, though Delta originally attempted to blame the power company.

Never mind, hundreds of flight connections were missed and millions of man hours lost because of this blown component. Now  consider, as Savinar implores us to do, what would happen if an entire power grid went down because of a massive blackout owing to excessive demand on the grid or lack of the high quality oil to run it.

No wonder then, that Northwestern University's Robert Gordon has posited that the Industrial  Revolution (at the turn of the 19th century) had a vastly bigger effect on productivity, economic growth than the so-called "PC revolution" in the 20th. Think about it! The former meant transition from the impossibly laughable energy of whale oil to kerosene, coal etc., a mammoth jump in the EROEI of available energy sources. The latter transpired over a period of roughly 20 years over which the EROEI of oil actually decreased from 16:1 to roughly 10:1 according to Savinar. So no wonder even millions of computers were not able to match the sheer change in productive output that accompanied the Industrial Revolution- and within the scope of the latter's purview we include the internal combustion engine, electricity, and indoor plumbing.

Gordon argues, and he's correct, that by the time the digital revolution got under way- say in the 80s- the big payoff in productivity began shrinking. Meanwhile, the PC-computing payoff basically has "come and gone" dissipating by 2004, when EROEI reached below 10:1 and fracking began as a last desperate effort to snare the vestigial ""riches" of oil - along with deep sea drilling.

Foroohar interjects certain techie skeptics who insist the BLS just isn't "counting productivity correctly". She adds:

"They argue the BLS is still too focused on the production of physical goods  missing hard to count benefits of the digital revolution".

But still, that misfires since as Savinar observed all that these benefits did is to expedite speed of transactions a bit (like in fractional stock trades and flash trades) but ultimately these too are hostage to EROEI and  energy quality. Thus, let too many flash trades be made in an increment of time delta t, and the whole system can't handle them. Then you see a flash crash like occurred in 2010. So in the end, it's all smoke and mirrors.

Foroohar points out this is also the conclusion of the Fed and IMF based on their own study. Thus, digital computing just doesn't make that big a difference .

Foroohar also points out:

"What we know for sure is that America's biggest run up in productivity occurred from 1945 to 1973, when there were major public investments in education, infrastructure, and worker training ".

But those investments didn't just occur in a vacuum. They were ultimately supported by the highest ever EROEI oil which hit as high as 19:1 in the early 1970s.

And as Foroohar's last statement puts it:

"Nobody us suggesting that productivity isn't rising because individuals aren't working hard enough. On the contrary, most economists believer the American blue and white collar workers alike are firing on all cylinders."

Indeed they are. It's just that the base energy they have to work with, to power their cars, computers or other machines, keeps declining in quality.

The next time you get into a debate with a co-worker or online econ aficionado about productivity be sure you bring up this aspect. It will render the discussion more serious, and they ought to thank you for that!