Suppose, by some fluke, you woke up on the right side of bed one morning. The sun was shining, the birds were singing, you were in love, and even the coffee smelled unreasonably delicious. Don’t worry--the financial blog ZeroHedge has a cure for this ailment.
ZeroHedge, whose masthead reads “On a long enough timeline, the survival rate for everyone drops to zero,” will never fail to give you the bad news of the day. If you read ZeroHedge instead of the morning paper, the morning sun, singing birds, and aromatic coffee will turn into black swans, crony capitalists, and rigged markets in coffee grounds. And Good Morning to you, too.
So is it any wonder that The Militant reads ZeroHedge? After all, they--no fans of capitalism--have been predicting the apocalypse for nearly a century now, and ZeroHedge simply fills in day-to-day on how the catastrophe is unfolding. That The Militant reads ZH is a reasonable inference from Brian Williams’ front page piece in the Christmas Eve issue. The article includes two graphs, both of which could have come from ZeroHedge, about employment in the USA.
The first shows the stagnant value of labor since 1980.
The second graph is entirely consistent with this. If the value of labor is declining, then the demand for employment also declines, and there will be fewer people in the workforce.
Employed persons as a percent of adult population.
Now there are at least four theories that explain this phenomenon:
- Tyler Cowen’s Great Stagnation theory, which states that technological progress on the scale of electrification, mass transport, mass communication, and health care, has mostly ceased since 1970, leading to a stagnation in wages and standards of living. See Tyler’s book, here. The subtitle is “how America ate the low-hanging fruit.”
- A theory (I don’t know who to attribute it to) that holds, contrary to the Great Stagnation, that there has been huge progress in the past couple of decades in automation. We are now automating drivers, lawyers, college professors, doctors, machinists, etc. That means there is a much larger demand for capital, and a correspondingly lower demand for labor. Hence labor gets devalued, even though the overall standard of living goes up.
- The ZeroHedge theory (which does not preclude the others) is that fiat money is the culprit. Central banks, by running the printing presses non-stop since the Nixon administration, have distorted finance now to the point where markets no longer give honest signals. The villains are the “Bernanke put,” the “zero interest rate policy,” or “the right hand lending money to the left hand, and calling that economic growth.”
- The Militant’s theory that capitalists suffer from a “declining rate of profit,” and in order to forestall this inevitable trend, they try to reduce the living standards of workers. They are doing this by increasing “productivity,” a term The Militant puts in scare quotes. They view it as a euphemism for speed-up, that is, capitalists just working their employees harder. This theory ignores automation or any other kind of technological progress.
Personally, I vote for the second and third items on the list. I don’t find the Great Stagnation theory plausible--there simply is way too much new stuff out there. Fracking technology alone is a huge game-changer. Add to that additive manufacturing, nano-technology, and the fact that even complex tasks like driving a car can be completely automated. It looks to me like our economic future is very bright.
On the other hand, the ZHers are right about fiat money. It is simply impossible to run a capitalist system without honest information about interest rates, stock prices, and government obligations. Central banks are inadvertently impoverishing the producing class (workers & capitalists alike) by destroying their savings and livelihoods. I don’t buy the conspiracy theories that populate the pages of The Militant and, on occasion, ZeroHedge. I don’t think Ben Bernanke is either evil or stupid. But he is trying to do the impossible, and it remains impossible.
The Militant’s solution to fiat money is socialist revolution. If there is one economic fact we know for certain, it’s that socialism doesn’t work. It never has, and never will. This is a non-starter.
ZH’s solution is what they sometimes call the Great Reset. While short of the apocalypse predicted by revolutionaries, fiat money will simply collapse, as has happened many times before--from Argentina to Zimbabwe, famously including the Weimar Republic. This, say the ZHers, will happen to the dollar, the Euro, and the Yen. People will lose their savings, trillions of dollars of assets will be wiped out, and we’ll all be a whole lot poorer.
But the very next morning the sun will shine, the birds will sing, we’ll still be in love, and somebody will be selling a really good cup of coffee at an amazingly low price. Capitalism will thrive.