Archives For economy

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Say you’re an employer in today’s economy and you’ve reached a point when you need to hire more people to meet customer demand. Considering the high unemployment rates and the most educated workforce on a quest to either get hired or advance their careers, the absolutely last thing you could complain about would be a lack of potential employees, right? Surely there must be plenty of people you can hire, many of them with the kind of skills you can use and out of a job through no fault of their own. And yet, the biggest complaint that some 52% of businesses constantly voice is a supposed lack of employable candidates with the right skills, and this complaint sent many a politician and activist looking for a solution to an educational crisis. But a new book by Peter Cappelli, an expert in management at one of the nation’s top business schools, lays out a case that it’s not the potential employees that are the problem, it’s the employers’ unrealistic expectations and a stunning lack of vision and imagination that are to blame for their hiring shortfalls. And it’s a strong case…

We all know people who have impossibly high standards for a romantic partner. We’ve all met the guy whose insistence that he will only date professional, doe-eyed underwear models with doctorates in particle physics from an Ivy League institution had us rolling our eyes. And we’ve all heard the girl whose dreams of a perfect, tall but not too tall and handsome but not too handsome modern day knight in shining armor made us doubt she’d ever even manage to have a relationship. Cappelli argues that from what he’s seen, many companies today behave just like those characters, seeking only the perfect employee and refusing to either train a new generation of workers, or raise the wages to attract the employees of their dreams. And since they either want an employee who’s been doing the exact job for which they’re hiring for at least three years at a competitor, or will train someone overseas how to do the same job for half the pay, they either end up competing over a very small number of people working for their competitors or hiring for the short term while plowing cash into new overseas ventures that can quickly become a massive liability due to many, many factors. This is not a gap in skills or a deficiency in education on the workers’ part, concludes Cappelli. It’s bad management.

And there’s more. There’s an ongoing boom in vocational schools and medical and tech related fields, so the supposed massive shortage of STEM workers may well be overblown, and we actually do have just enough scientists and engineers out there. However, employers are refusing to pay them adequately and expect them to have not just work experience in the field, but a very specific kind of work experience. Forget the much talked about “transferrable skills” from past careers. No one wants to hear about them. Even worse, while you might be the golden candidate now because you’re applying for the same job at company after company, you’ll have trouble moving up the career ladder because those hiring you want you to keep doing the same job that you’re doing now, not advance into new roles. Or your job could fall out of favor and you’ll find yourself unemployed in short order, and you’re likely to stay unemployed because employers are now often discarding resumes from those who lost their jobs, often assuming that if you were a good employee, you would still have your job, and if you don’t, this means that you simply weren’t valuable or good enough to keep. How do you combat such an obsessive, all-consuming myopia? And why do we allow the employers who refuse to hire anyone but dream candidates get away with blaming the workers for not living up to their wildest hopes and dreams?

What if we were to continue to follow this game of musical jobs? Employment wouldn’t grow much without an occasional economic bubble to prop up job creation, workers would constantly have to change careers in the attempt to keep up with the latest fad, amassing degree after degree and mountains of debt gambling on the latest major they undertake paying off into a job, wages would remain stagnant, and employers would still be complaining about a lack of qualified candidates, using the term “qualified” as a synonym for “perfect in every single way.” They’ll keep outsourcing, creating economic bubbles elsewhere and spending billions on efforts to manage the liabilities of sending work thousands of miles away to a group of people they barely know, in a country that will more often than not employ protectionist measures that allow former subcontractors to build their own versions of the companies that once employed them with their bosses-turned-competitors footing the bill for their creation and growth. This is an unstable, unsustainable trajectory, but unfortunately, it seems to be the trajectory we’re following, assuming that the market knows best even when it never did…

According to what we’re often told, if we work hard, study, get good grades, and go to college, we’ll have good jobs that let us make a steady living and the typically poor college student days will be long behind us as the president of a university hands you your graduate degree. Sure, you may not have the life of plenty but you are definitely clearly of having to go on welfare to feed yourself, right? Actually, maybe not. As it turns out, there’s a disturbing number of PhDs on food stamps working odd jobs after all the schooling and hard work that would make them immune to the trials of the working poor, according to the prevailing societal truisms. Many times, the initial reaction is to say that it’s really not that huge of a problem, especially compared to the millions upon millions of non-PhDs currently out of work and that these situations are almost certainly temporary. Of course one could see why not a whole lot of administrators and pundits would be interested in talking about PhDs on welfare at any length. It really drives home the fact that a lot of long-held American beliefs about education and income can vary widely from reality and that you could do everything right only to end up having to file for aid.

Unfortunately, it’s not just the PhDs who have trouble turning their education into stable incomes. Quite a few undergraduate students are also ending up making a lot less than they may have expected, and while you can say that the compensation premium for a bachelor’s degree hasn’t changed very much even during much of the Great Recession, the worst salaries in decades have effectively made that premium worth far less than it once was. In fact it’s a neat accounting trick that helps for-profit trade schools and college lenders. They can lure in students by showing the relative premium of a college degree but forget to mention that in real dollars, this premium gives graduates far less purchasing power than they had five years ago. Oh and that’s if they do manage to get a job, which may or many not even be in their field. But come on, they did the right thing, they’re obviously on the way to something great, right? After all, they studied hard enough to get into college and after applying themselves earned degrees, exactly as mom, dad, and everyone else around them told them they’ll have to do to get a good job and start a career. How could it be that we send millions of students to college to spend all that time, money, and effort, and have them rewarded by crushing debt and unemployment?

But the sad fact is that this is exactly what we obliviously do while pretending that the system in which we’re working is fundamentally just and seldom fails to reward hard workers and good scholars. All right, why don’t we look at it another way? A lot of the welfare PhDs spend tens of thousands of dollars getting degrees in all sorts of humanities disciplines for which there’s little demand so surely they must be to blame for their bad situations. How many people will be interested in employing someone who wrote a dissertation on the social dynamics portrayed in silent films? Who but a handful of universities need a PhD in theology? This may be a good way to salvage the seeming fairness of the system but it’s fundamentally flawed. Yes, as I’ve said many times myself, you can’t rely on a degree in humanities to pay your bills, but at the same time, the problem isn’t that humanities PhDs are ending up with big loans and empty pockets, it’s that a degree does not guarantee sustainable, full time work. Even the most highly demanded STEM disciplines are subject to the whims of the market and predicting exactly what will be needed in what city and by what companies in four years before you even start your first class, would be an exercise in clairvoyance. Yet we expect college students to perform this feat every year and then fume when they fail to fare any better than a psychic. Of course they can’t do it.

On the part of the humanities scholars who find themselves out of work and academics who find themselves under attack, some write articles berating modern society for ignoring their passion for crass consumerism. I understand it may be disheartening to know that the world cared more about Twilight than Joyce and I agree, it’s really quite sad. At the time time, people need food, shelter, security, roads, and medicine. It’s not that PhD after PhD is discarded by society for daring not to care about the latest Angry Birds sequel or choose to study the most obscure language in the world to mine it for insights into human culture, but that its immediate and material needs have to take precedence over their academic ones. Society doesn’t tell you to crank out a little metal widget because it needs to print some navel-gazing self-help treatise or load another trite pop bleating on iTunes, but because it needs to fix a road, or develop a new antibiotic, or write some new software to keep important financial transactions secure. It doesn’t want the luxury to plan for its new generations and the best you can do is try to be at the right place, at the right time to find a career close to what you like to do, and when you get there, there may not be a reward for college or good grades and a C- student may be your boss. This is how our world works today and let’s not pretend that there’s some magical combination of degrees, GPAs, and professional credentials that will save you when you find yourself in a really bad economy…

There is a bitter Israeli joke reported by some journalists who write about the nation’s rapidly growing schism between secular Jews and devout Haredi fundamentalists. It states that one third of the country works, a third pays taxes, and a third serves in the military. Unfortunately it’s the same third of the country. Sadly, that’s not a far cry from the truth since in Israel, fundamentalist Jews often live off government welfare for the religious, do not work because they believe their only task in life should be reading and re-reading holy texts, and can’t be drafted to serve in the military. And so the secular Jews fight wars, work, and pay taxes while the Haredi sit in synagogues, have families with 8 to 12 children, and, to put it bluntly, mooch off the secular population, loudly protesting any resistance to their whims in the lowest and most underhanded ways imaginable. With huge families they don’t bother educating, they have virtually no useful skills to contribute to modern society, and as secularists limit themselves to one or two kids, their population is growing by leaps and bounds. Israel has a serious fundamentalist problem which will have to be confronted soon, and from which we need to learn.

As has been noted before, fundamentalism is antithetical to the modern world for a whole host of reasons, and a society trapped in the past as required by extreme religious dogma, can’t adapt to the changing world it inhabits. Israel’s economic game plan relies heavily on research and technology, primarily computing and all applications of it, ranging from social media to weapons design and security. Huge investments in medicine, basic research, and computer science require a workforce that completed the prototypical modern education heavy in science and mathematics. And guess what the rapidly growing Haredi populations usually consider heretical distractions from studying the Torah and Talmud? Exactly that. While the government wants to keep plowing cash to create the most modern economy we can imagine, it’s facing the fact that many of those who are just the right age to either take full advantage of these investments, or can start their education to reap the future benefits of this modernizing boost, have either voluntarily ruled themselves out from consideration with their religious devotion, or have been prevented by their fundamentalist parents from becoming scientists, or researchers, or engineers. It’s a textbook example of the kind of thing that gets Dawkins and Harris fired up, a denial of education and knowledge through imposed dogmatic ignorance and arrogance.

And this is not to mention the political and social fallout from a fundamentalist swarm either. Secular Israelis will fume about stories of Haredi blocking ambulances from crossing their districts on Sabbath, demanding a strict obedience to the Torah’s prohibition of work on that day even if this results in someone’s death because it must have been G-d’s will to take this person’s soul on Sabbath. If you believe the claims, people have died because ambulances either didn’t get to them in time, or because the patients didn’t get to a hospital quickly enough to start treatment. Trying to negotiate with Jewish fundamentalists seems futile. After all, how can you have a productive discussion with those who believe that their opinions are actually divine edicts and you’re a sinner who is disobeying the world of G-d rather than a person with opinions and ideas that need to be heard and discussed in more depth? If you visit Israel, you’ll see a country divided into a population trying to keep up with the modern world and embrace its challenges, and a population which confines itself to the 18th century and regards their fellow citizens who are scientifically educated and modernized with thinly veiled contempt, if not outright pity and disgust. What could be a successful case study in how to use government investments in science and technology to boost the economy and education is being hampered by arrogant dogmatism.

Of course this is not a perfect look into the future of the United States in which Christian fundamentalists gain inordinate political power since they do believe in science and technology as long as they don’t run contrary to their beliefs with their application, and wouldn’t spend all their time only studying the Bible. They would be more than willing to serve in the military since they see themselves as holy warriors, and serve already. In the grand scheme of things however, outsized fundamentalist influence on American politics would defund a lot of scientific and research programs, casting them as a waste of public cash, keep hobbling science classes by either injecting religious connotations into them or forcing them to stay mum about crucial concepts in both biology and physics, and trigger many highly unpleasant social changes which would force religious dogmas into law. All of it is being done now and while so far, promoting social archconservative views in public is just an easy way to win votes for right wing candidates while implementations of these views generally stall in the legislative branch or get watered down into irrelevance on riders to funding bills, extremely powerful and really devoted fundamentalist lobbies could start imposing their will through politics. And in a day and age when we should be investing into economic modernization, we literally can’t afford to step back in time and simply bow before the whims of those convinced that they have divine edicts to make their own rules.

Sometimes you come across an idea that at first sounds far too crazy to ever work. But then, as you think and do a little mental math, you find that it actually makes perfect sense despite running contrary to everything you would think should happen. One such idea calls for worldwide forgiveness of national and personal debts to get us out of the ongoing global economic turmoil, and not in the form of a leveraged buyout or new plans for repayment mind you, but that of a full on debt jubilee. Sound utterly absurd, doesn’t it? Giving up on money you lent without getting a significant portion of it back in even the best case scenario? How will that help? Isn’t the whole point of lending money to get it back with an interest payment in the first place? With trillions in debt around the world, surely this would only make things much worse for everyone as banks trying to collect have to write off billions since a similar dilemma triggered the Great Recession in the first place. But then again, if we consider one simple fact, this suggestion may not be as insane as it may seem. After all, there’s a reason why the banks and governments are trying to collect those trillions. Because their debtors don’t have them.

Consider the following situation. You lent money to someone who used it to buy a new car and were getting a regular payment every month on the debt. However, things changed and the person lost his job. You took the car back but there’s still a lot of money owed on it and because a lot of other people lost their jobs, selling this car to get your money back is proving to be very difficult. Meanwhile, your debtor stopped paying you altogether because he chose food over paying back the debt. What are you going to do now? If you’re a mobster, you can send in Vinny with the brass pipe, but as a more or less respectable lender, all you can do is demand that he pays you and send nasty letters to credit agencies about his ability to honor his debts. You could hire a major collections agency to harass him but ultimately if he won’t pay, there’s no legal way to force him to do it over a small wage garnishment if he manages to find a job. After expending all the time, effort, and yes, money to file complaints and hire all the collection reps, you still don’t have much cash back. Your debtor just doesn’t have that money and all you have is the fantasy of getting it back and a note that someone owes you that cash. And at some point you’re just going to have to cut your losses and live with the situation or you’ll lose even more in your attempts to recover the money that isn’t actually there and may never materialize anyway.

Many lenders across the world are in the same situation. With widespread unemployment across the world’s economies, yawning national debts, and failing banks on life support all around them, their debtors aren’t very likely to have the money to pay them back and in some cases, their hounding actually interferes with whether they can even get a job to pay them at all. When banks refuse to modify loan payments or harass debtors, they effectively shoot themselves in the foot by sabotaging a method of getting their money back to some degree in the near future while building ill will with their debtors, giving them every reason to think that there’s absolutely no way to reason with them, and trying to create an alternative debt repayment plan and just walking away with no additional payments will have the same exact consequences. Given the pressures of survival, they will opt for simply walking away more often than not under these circumstances. Banks win nothing, the debtors lose across the board, nobody is happy, and the banks may now have to ask for new handouts because for some odd, inexplicable reason, their debtors aren’t paying them back. So a debt jubilee is basically saying "forget it, we’re just going to start over." Of course there’s the moralistic downside of excusing debtors who acted in bad faith and falsified information, but in the grand scheme of things, banks don’t exist to enforce morality.

Lenders are in business to make money and relying on imaginary money that should come any day now from the deadbeats is not profitable. Instead of demanding cash they’ll never see or growl about giving debtors an easy way out, they should simply make it hard for those whose debts are forgiven to take on new loans until a new track record of good payments can be established and let those bad debts go. This way, those who stay current and repay their debts on time are given great borrowing terms as a reward, while those whose debts were discharged would be denied all but the absolute basic lending services as a punishment, much like we already do. Bad debts are cleared, companies can now operate with more freedom, people under a crushing debt can finally breathe out and start spending and stabilizing themselves. This would be especially true for a household in which a medical emergency triggered a default since people don’t have a choice in getting sick, and medical care can be exorbitantly expensive, resulting in six-figure medical bills few can pay. Though, as a world fatigued by three years of debt crises recovers through debt forgiveness, there has to be an agreement that no one can continue the status quo and trigger another such debt crisis, an agreement what will be hard to reach once the global debt forgiveness genie is out of the bottle and can be summoned again…

Over the last month, I wrote a few examples of how corporations acting in their own self-interest can create a whole lot of problems for society at large when politicians basically allow them to buy legislation favorable to their goals. But a big addendum to the description of that issue seems to have been missed and it was that addendum which was used to explain why supply-side economics doesn’t work. So just to make things clear for future reference, all the corporate self-interest lamented on the web should not surprise us and we should not be turning companies into villains. All of us have our personal interests and all of us with the means tend to do what we can to get our way. Complaining that a company wants less taxes and regulation is like voicing your indignation when a hungry bear bulking up for the winter mauls you after you try to take berries under its nose. The bear doesn’t care about you. It doesn’t care about other bears. It just wants to eat and if you want to take what it sees as its food away, it will predictably get agitated and use its superior strength to protect what it found so if you really want berries that badly, feed the bear something else and pluck them while he’s busy.

No, the problem comes when corporate CEOs start fancying themselves as political masterminds and make their business not just a way to make money for themselves and their shareholders, but to push their political dogmas on all those around them. When a CEO rises from his chair and declares that the nation in which he lives should be ran the way he wants and proceeds to bribe a legislator to act on his personal whims, then it would be more than appropriate to complain. And his shareholders shouldn’t be too pleased either since the focus on personal ideology and short-term avarice means bad PR and less sustainable dividends for them. I bet you could make a lot of money by stripping away jobs from entire towns and outsourcing everything to the lowest bidder. But eventually, you’ll run out of customers since they have nothing with which to buy your goods and the nations to which you outsource won’t let you sell your wares because they’re using your money as the start-up capital for your future competitors. And the politicians we elect supposedly to guard our interest have to be able to keep companies from trying to mandate what’s best for them by bribery, and avoid elevating the corporation as the most idyllic and model organization in all of existence because that’s just wrong.

The truth is that whenever you have a large group of people, you’ll have bureaucracy, inefficiency, and people trying to dodge responsibility for their mistakes. Whenever politicians and pundits talk about inefficiency and red tape in government, I like to try and compare that to the supposedly stellar efficiency of a major company, especially when it comes to resolving such things as billing issues. Just ask some very satisfied and happy customers of Comcast and AT&T how efficient and responsive these conglomerates are in responding to an angry customer trying to fix his bill. Or the kind of stellar service you can expect from a typical major airline. So just as we shouldn’t naively expect that companies are necessarily wonderful, efficient, and benevolent to the economy at large, we also shouldn’t expect them to create jobs for us whenever we need them and then hurl frustrated invective at those companies when they don’t. Take the bear in our analogy. It’s not his job to make sure you’re fed since he’s looking out for his needs. Likewise, we shouldn’t blame companies for not hiring a whole lot of people, especially when the economy is down. They have no incentive to do so and the small tax credits offered in the last few years to generate new jobs don’t offset the expense of hiring a new employee to nurture and train from scratch. And promising them tax abatements for years on end simply gives them some incentive to move their offices after the abatements are up and taking the few jobs they brought with them.

Want to get companies to create jobs? Make it in their short term interest to do so. The problem is that over a three decade stretch, the economic and political structure we set up has elevated The Company to the status usually attained by sages and saints. People placed their hopes and dreams into wise businessmen whose brilliance was lauded in breezy hagiographies, and the CEO became the epitome of logic and efficiency. We thought that they’d go out and start looking for unrecognized talents in people, train them, promote them, and pay them to learn and grow because they knew what was best for the economy in the long term. Watching our mythical corporate idols fall from grace in the Great Recession, we now know that their real focus is squarely on the quarterly earnings reports and that they’re not all brilliant visionaries who have amazing solutions to all the world’s problems laying around on their desk. But the companies aren’t the bad guys here. Sure there are corporations ran by venal, short-sighted, avaricious CEOs with a loose grip on ethics and who can dodge tax bill after tax bill while decrying how high taxes are, but did we really expect Ghandis and Buddhas? People go into the business world to make money and we shouldn’t have been treating this pursuit as some noble goal for the betterment of the world. It’s not that businesses lost their way over the decades or became evil. It’s that we were exposed to far too many romantic idolizations of the business world and are now disappointed that it was all just a facade we bought hook, line, and sinker at some point in our lives.

Back in January, two researchers who wanted to measure the benefits of college education tracked the gains and losses of some 2,300 college students across numerous majors in different universities, which ranged from small, private colleges, to large, public, state schools. After testing how much they learned and tracking how well these students did in the job market after graduation, the data turned out to be abysmal, not only in how well they improved in critical thinking and complex reasoning, but also in how difficult it was for them to find jobs after completing degrees that were supposed to give them an edge. According to the study, the only thing the students have to show for their education is debt and poorly paying positions which leave nearly half of them still living with their parents, unable to start independent lives on annual salaries of $15,000 and with extremely toxic college loan debt, which can only be discharged by being paid off in full, an act of Congress, or an alien invasion. In the spirit of their cheerful findings, the researchers called their report Academically Adrift, and after casting college in such a dark light offered more college education as a solution. Wait, what?

I can certainly follow the thread of thought which doubts the value of the kind of education college students get today and went as far as asking whether we really need four year specialized degrees since there’s a large mismatch between majors and careers, offering shorter, more targeted, apprenticeship-type programs which let students work while they study and bring down their debts. Of course this is an idealistic setup since most companies are too used to hiring unpaid interns and teaching them as little as possible while using them for work that every other full time employee is either too busy to do or can afford to give to the interns. Having any kind of paid internship, especially when the economy goes sour, is very rare, and reserved only for immense conglomerates working on major government contracts, or government agencies. But hey, when you’re done with that college education and proudly display your diploma, you can get a full time job, right? Again, going to the report we find that yes, you can get some sort of job, but about half the time, it’s not going to be a full time gig that will allow you to move out, live on your own, and start building your fiscal portfolio. The other half, you’ll make enough to just get by after you’re done making loan payments.

Hold on a moment though, what about the degrees themselves? Maybe what those degrees offer would be of no interest to an employer? If you graduated with a bachelors in English Literature, maybe you could apply for  something like a copyeditor’s post which doesn’t pay all that much, but that’s about it. And yes, certainly some degrees are in much higher demand by employers than others and you are more preferred when you have a STEM degree than a humanities degree. However, looking at the employment numbers through the prism of what majors are in demand implies that most of the degrees being offered are useless for employment. The students who have the most trouble finding work didn’t all peruse a degree in philosophy and have skills that apply outside the academic world. It’s just that employers don’t value their education and their age group has been hammered by the Great Recession, not only in the U.S. but worldwide as well. So why did they go to a college and spend four or five years working on degrees that yielded them little outside debt and a paper with very fancy writing? Couldn’t they have gotten a better result by not even going since they would be making just as much, if not more, and avoid the pain of student loans that will haunt them for decades?

On the part of the colleges themselves, there’s a major unresolved issue greatly contributing to the problems faced by new graduates; the institutions’ insistence that they aren’t in the business of providing jobs, with the downright dangerous advice by academics to avoid vocational majors, majors like engineering, computer science, and material sciences, urging students to "expand their minds" while they’re young and in college. If the students are trust fund babies going to college for the experience and the desire to learn, they could afford to take this advice to heart. But expanding minds and pondering existential questions in literature is not why a lot of parents scrimp and save to at least help send their kids to college. They’re sending their kids because it has been instilled in our culture to equate a college education with job prospects. Whether or not professors, administrators, and researchers who work in academia agree with this attitude is irrelevant here because the decades of social reinforcement have turned the employability of college graduates into the yardstick by which colleges are measured in the public eye. Students go to colleges because they expect to get jobs after they’re done and it looks like what they’re actually getting is a lot of routine memorization, exams, grad students who fill in for professors teaching classes and grade by a bell curve, and debt. That’s obviously not good.

And that brings us back to the original contradiction on the researchers’ part. After presenting data which can’t even be spun by a professional political adviser as having anything good to say about the state of colleges or higher education today on a macro scale, their prescription falls right back to that cultural imperative to equate more education with jobs. Despite this obviously not being the case and despite their own findings showing it to be untrue, the best they seem to be able to offer is the “well, we should teach better” platitude which leaves all the institutional and social problems on which we’ve touched, unaddressed. As long as we pretend that an expensive college degree is the answer to all of life’s fiscal woes and assume that colleges feel that their job is to prepare high school graduates for a career in the working world when they certainly don’t see it that way, we’re going to have problems and no amount of instruction in any topic, no matter how good, is going to really help where it counts. Today’s new college graduates are some of the best educated people around but when they try to even get on the first rung of the corporate ladder, they’re pushed away. That alone should give lie to the notion that more education equals better education and yields jobs. If you’re a parent of students ready to enter college, start worrying. Your children’s future is not safe, and very few people seem to care.

[ photo by Jim Merithew and ]

Recently, an economic think tank funded by a well known billionaire with liberal leanings and demonized by a cadre of Fox News pundits as the manifestation of either the Illuminati or the Politburo, met to discuss what’s been plaguing America. Their conclusions are bleak, to put it mildly, but not at all surprising. Actually, it was a laundry list of issues both parties have been complaining about very loudly over the last three years with no tangible outcome for the public at large. Nowadays, it’s become a prevalent trend in the all too few remaining pockets of civil discourse to basically mull around the same few problems of which we’re quite acutely aware, then do it over again with the same exact problems just months down the road while in the meanwhile, these issues are left completely unaddressed. The implication isn’t that the United States is completely unaware of what it needs to do to boost lagging economic sectors or balance its budget, but that the legislative circus we were presented in the past few weeks is a symptom of how acutely we’re aware of our problems, but how we managed to back ourselves into a corner in which it’s a taboo to actually apply any sort of substantial fixes…

Simply put, we’re not allowed to fix our problems because someone will complain that a cut here or a boost in some particular area of expenditures is against the nation’s principles or interests, often based on recitations of ideology rather than facts. Let’s start with the biggest target of critics regarding the budget wars happening in Congress, the Department of Defense. Since the beginning of this year, the Pentagon has been sending all the signals that it’s ready for a budget cut and that it’s really fine with the whole idea. Gates essentially froze at what pace defense spending would grow when adjusted for inflation while Mullen made somber remarks that put the yawning national debt as the biggest threat to the nation’s security rather than terrorism. There was an anonymously released memo criticizing the over-militarization of foreign policy emanating from the Pentagon, citing that too much money is being spent on redundant programs rather than education. Basically, those who actually run the defense establishment took Congress to water and dipped their head in it. But Congress just refused to drink, leaving the military’s budget untouched, even as the military was saying that a budget cut was not going to be a major issue and that it needed to readjust how it handles wars anyway. Why? Because it’s a taboo to touch military spending since it’s election season attack ad gold for opportunists.

There’s also the role of lobbyists who push defense contractors’ proposals through lawmakers, regardless of whether those projects are really even needed and their cash will immediately go to those who vote to shower them with contracts, creating incentives to do what’s right for the defense contractors, not what’s right for most of the nation, and at times, not even towards what the military itself considers truly important. This also works the same way when it comes to energy and financial conglomerates, which are almost buying the laws which favor them by offering campaign donations and jobs to lawmakers who vote in their interests. And when you’re selling votes to the highest bidder, should it be a surprise that whatever is best for those bidders tends to turn into law and sweetheart no bid contracts? But you see, we’re also not allowed to simply cut off the relationship between companies and lawmakers because both will complain that they’re just representing what’s best for their country and that depriving companies of their voice is wrong. This is, of course, despite that fact that they are substituting what’s really going on with an allusion to free speech, which was never the issue anyway. The idea of simply steering the government with cash to fulfill your personal goals works well in what were called banana republics, but it simply doesn’t work for a government intended to work for the taxpayers rather than a clique of companies with the cash to finance the next election cycle for their candidates of choice.

Oh and we’re not allowed to criticize companies and the wealthy either because they create jobs. We are only allowed to give them tax cuts and any tax hike is immediately labeled as socialism as the ghost of the USSR is marched out with an unholy zeal to drive the point home. Though oddly enough, labeling banks as too big to fail, exempting them from regulation, then handing them trillions of dollars in bailouts they can use to lend to us what is basically our own money every time they get in trouble, is considered capitalism. How? I don’t know but I suppose if you can buy half of Congress, you can also buy the terminology being used in the debate. And just out of curiosity, since when was it a company’s goal to create jobs? Last time I checked the only goal of a company is profit. They’re not supposed to guarantee a low unemployment rate. They’re supposed to sell and invest enough money to benefit themselves. When did they become some sort of divine power which grants a job to those in need if we sacrifice some of the tax revenue the government needs to run? Have you seen the unemployment rate lately? By official statistics, it dipped from about 10% at its peak to just under 9% and if we consider stats which capture discouraged workers, the numbers are closer to 17% and 15% respectively. It’s not even a statistically significant figure and there’s absolutely no evidence that corporate bailouts helped.

We gave trillions in tax cuts and cold, hard cash to create jobs. We boosted employment by about 1%. This is an absolutely dismal return on investment. And just to top it off, during another round of glorifying businesses as saints, the president appointed the CEO of a company that makes billions but pays no taxes to teach how the rest of the nation should be competitive, by, hint hint, dropping the tax rate. You know, for taxes they already don’t pay. But don’t you dare insult companies. They’re what beat back the Soviet menace and you must be an evil, seditious communist in disguise if you point out that companies are simply groups of people who are out to make money and on whom we shouldn’t rely for assured jobs. And defending the St. Corporation image of the economy’s savior are, surprisingly, people who believe that one day they too will be rich and any tax hikes on the wealthy or big companies will affect them and discourage them from becoming rich. Really, you will be rich one day, just like that? When some nine out of ten businesses fail and only certain skills will grant you an actual semblance of upward mobility? Don’t get me wrong, I’m an immigrant whose family worked very hard to make a living and who made big strides in America, strides that are impossible in many other nations. But it’s very difficult to make the leap from well-to-do and wealthy in this country and you shouldn’t base any economic policy on your personal fantasies of being the next tycoon who’s practically bathing in money.

I mean do you really think that you’re going to be so upset with your vast mansion, your fleet of exotic cars, and your beach house in Malibu if you get taxed an extra 3% or so? You’re going to be incredibly rich after all! What would a few percent of your income do when you can afford all those things according to your dreams? Does this really make you feel like a noble in early 20th century Russia dragged out of your house by serfs as all of your inheritance is pillaged and you’re reduced to a beggar on the streets? This abject terror of anything that a conniving or paranoid politico can put into an analogy with the USSR, no matter how ridiculous or off base that analogy will be, has to stop dictating every economic policy you craft. The worship of corporations as job giving saints has to eventually come to an end in light of the simple fact that it’s not why companies exist. And all the dreams of becoming rich used to justify whatever slack is given to those who exploit Cold War fears to live on what amounts to government handouts far exceeding any welfare or Medicaid program in history, simply have to be put into a realistic perspective. Today, the key to social mobility is education, research, and acquiring an elaborate set of specialized skills in advanced study programs. Ironically, the very things that Republicans are so eager to cut while whining about education beyond basic literacy being an utter waste of time

In today’s economy, everybody is worried about jobs and rightfully so. Some experts are even forecasting that we can forget about a full recovery in the job market until 2017, and the big fear for many is that their skills will no longer be needed because some jobs are going away forever. Unfortunately, for many workers, that does seem to be true thanks to the new ways so much business is being done. This is why in this election China, and its image of a global outsourcing hub which creates millions of new jobs at the expense of others, is the boogieman so often cited by politicians when it comes to addressing soaring unemployment. But there’s one more reason why millions of jobs are being eliminated altogether, a reason that doesn’t get much attention or airtime, and a reason much more difficult to sum up in a catchy slogan for an attack ad, or to fight. Robots.

As reported by a piece in Good Magazine, more and more manufacturing jobs are being automated because unlike humans, robots don’t need breaks, they don’t require benefits, they don’t negotiate wages, and if they’re not doing the work they’re supposed to do, you can fix them or just send them back and buy new ones. On top of that, they make far fewer mistakes than fallible and fatigued humans. They don’t necessarily cost that much less than humans since prices for heavy duty industrial machinery easily run into the millions of dollars, and they’re not perfect, requiring a human to inspect their work and adjust their aim and actions accordingly. But in the long run, it’s easier to employ a small staff of engineers to supervise the machinery than pay benefits to a few hundred blue collar workers whose wages are often negotiated by unions, and the legacy costs are much less. And it’s not only the manufacturing workers who should be concerned. Although while collar jobs are still safer than blue collar ones, automation and outsourcing will also take its toll there.

Paperwork is increasingly being handled by software or outsourced to cut costs, and with every recession, the management tries to push the limits of both to see how much work can be done without having to start hiring. This is why it takes a while for many jobs to come back after a recession. It’s not that the companies are timid about the economic landscape after a recession is over and just need another tax incentive or a bonus to hire new employees, as so many politicians and supply-siders often repeat whenever the question of how they’re planning to create new jobs is voiced at a town hall meeting. Companies aren’t hiring because they just don’t have to hire a lot of people and the tax credit or cash incentive put up against an average worker’s salary with benefits are just too small to hire some extra people and explore new opportunities. Again, keep in mind that there will always be jobs that can’t, and shouldn’t, be outsourced for strategic or legal reasons, and there will always be a need to check that the software did what it was actually supposed to do. But the double punch of outsourcing and automation is going to cut down on a lot of clerical and administrative jobs.

So, you may wonder, who’s safe in the future other than the IT people who’ll have to build, maintain and fix all the robots and software packages in question? We can say that human subject matter experts will always be needed to teach and supervise the machinery, though there will be fewer of them than many companies have today. Managers will be needed to coordinate work and come up with new ideas and products. And yes, we’ll still need skilled trades-people who can do things most machines won’t be able to do safely or effectively for decades to come. When it comes to outsourcing, the picture is rather murky. Outsourcing as we know it is an example of globalization which supporters say adds $1 trillion to the American GDP every year, most of that in the form of cheaper goods being sold to more people. But the globalization currently being practiced is often very one-sided. American and European multi-nationals send work overseas, but Americans and Europeans will have a very hard time trying to find a job in hot global markets as foreigners. And the very countries which benefit most from outsourcing tend to be some of the more protectionist states as well.

In other words, we’re sending money and jobs to nations while expecting them to create new opportunities for us, building a loop of globalization benefiting everyone involved. But what really happens is that these nations take the jobs, ship back the required product, then shut out foreign companies trying to get what their leaders see as too big of a slice of the economy. And while we talk about the need for free trade and how protectionist measures would take a toll on our economies (and they certainly would), the world’s outsourcing hubs nod in agreement as they write laws forbidding foreign companies to accumulate more than a certain stake in their homegrown corporations, and write immigration laws that keep foreign citizens from coming over and trying to get jobs in high demand. And that’s a problem requiring a lot of diplomatic work to resolve…

Let’s go back in time to March of last year. Stocks are in a freefall, the bailouts are streaming out by the billion, jobs are being cut left, right, center and sideways, and people are mad at Wall Street’s greed and arrogance. Heated exchanges on the web and on TV found villains across government and industry, and while just about every ideologue found his or her favorite company or politician to blame, by far and away, the business world got the brunt of the fury. This is why the Daily Show’s Jon Stewart delivered his now classic rant about CNBC, the business news network which claimed to have the access and expertise to keep you abreast of the what was really going on on the market but in reality, focused on Wall Street hype and corporate PR campaigns…

Fast forward more than nine months later. And things seem pretty much the same. Yes, the stock market isn’t losing value like a deflated balloon every day and there have even been a few rebounds and rallies. But when it comes to the economy outside Wall Street, the unemployment rate is still hovering around 10%, though that number is staying relatively consistent because people are leaving the workforce outright, and if we were to account for all the underemployed, discouraged and unemployed workers who aren’t entitled to collect some sort of unemployment, like independent consultants and freelancers, the real un- and underemployment rate has climbed to nearly 17.5%. Wages have remained stagnant for the last two years for those who still have a steady job and pay raises are the worst in 33 years. Of course that’s not an issue for Wall Street, which used the money loaned to it to make lucrative bets and is now giving out millions in bonuses to its employees. To take a cue from Rick Santelli’s fifteen minutes of fame last year, who wants to subsidize the losers’ mortgage when you can subsidize their salaries and refill their coffers instead?

While we could talk about the details of the TARP program and the moral implications of what’s going on until the next stock market calamity, there’s something else that we should note about the current state of affairs. If you recall, the idea of making money available at attractive terms to businesses who would then create more jobs and facilitate an economic recovery in a down market is a cornerstone of supply side economics. Yes, in a textbook sense, this is usually done with tax cuts and incentives but since the 1980s, helping businesses in hard times started incorporating bailouts. Relying on game theory, the strategy’s proponents argue that when the affected businesses recover, they’ll need to hire more and more people to restructure and keep going, and those people will go out, spend their hard earned paychecks and keep stimulating the economy. On paper, it works. In reality, even a cursory view of the broad economic statistics will show that all it does is increase the income disparity between middle class and the wealthy and save failed businesses from meeting their fate in the free market rather than use taxpayers as an insurance policy that always pays out.

But why isn’t the strategy of injecting cash into the economy working? Well, it’s actually pretty simple. People’s decisions aren’t always governed by far-sighted logic. Companies in big trouble will use their money to either pay down debts, streamline their operations (which ironically enough, often involves layoffs) and when hiring on the upswing, they can always outsource the work to save cash. The notion of the great benevolent market just doesn’t work in the real world because companies are under no obligation to create jobs anywhere other than in the best hopes and wishes of those giving them tax cuts and bailouts. This is why Wall Street used the money given to it to rejuvenate itself and the rest of the economy is still in the doldrums. What did the creators of the TARP program expect? Bankers knocking on doors bearing gifts and high paying jobs to those in need of employment in the wake of the recession? Was there was no way that anyone on Wall Street could’ve come up with a free market solution to the dilemmas at Bear Sterns and Lehman Brothers so the trillions handed to the financial sector might’ve been used for infrastructure upgrades and grants for R&D projects that would be able to really drive the economy and create jobs over the next decade without running up sky high deficits?

Slowly but surely, the nascent space tourism business is revving up. Not every company that wants to send its space planes into orbit and maybe even beyond, is going to survive, and it will take years until the industry sees profits coming in on a regular basis. But they’re working on a far more efficient and cheaper way to get to space and there are a lot of people who’ll pay for that capability, from wealthy tourists to government agencies and the military. At the end of the day, some of today’s space-bound entrepreneurs will make money and help create a brand new market overflowing with opportunities and big ideas for the future, like they envisioned.

lunar tourism

If the bankers and traders on Wall Street are watching, there’s an important lesson space tourism companies can teach many of today’s biggest businesses. What’s amazing here is that the likes of Lockheed Martin and Boeing or Raytheon aren’t out there in the desert building a new generation of space vehicles. All the vehicles in use by NASA and the ESA since their inceptions were built by huge defense contractors. And now, when the opportunity to make space flight cheaper and rent your space planes to cash-strapped scientists and space agencies, they’re nowhere to be found. Instead, ambitious billionaires with a vision to put humans into orbit in the kind of quick, cheap and efficient manner we’ve been seeing in science fiction movies and cartoons since the 1960s, are the ones putting the space faring future together. Why? Because they have imagination, a drive and they’re thinking ten steps ahead, unlike so many risk-averse corporations mired in groupthink.

Virgin Galactic won’t be profitable for years to come because it’s going to be a niche business catering to the very small crowd of people who could afford to drop almost a quarter of a million on two and a half hour of out of this world flight. To Branson, that’s fine. He’ll make money when the space planes are being paid off by the cash flow his new company will be generating down the line. Meanwhile, just like SpaceX, XCOR and Space Adventures are doing now, he’ll diversify and find ways to leverage his launch system into profitable deals for communication companies and possibly even government projects. The typical short-term mindset of using a tedious mathematical break-even formula and subject it to impatient scrutiny devoid of any vision beyond that of making money from it as soon as possible, doesn’t apply here. Rather than make a dollar now, commercial space tourism is focused on building a market and making millions in ten years.

Compare that to an aerospace giant the managers of which demand vast simulations of everything they want to do, then spend months if not years going over abstract numbers and suffering from epic cases of analysis paralysis which often leads them to the conclusion that the venture is too risky, the shareholders won’t like it, corporate raiders on the board will start a proxy fight, and Wall Street will bury their stock in a week. Just think of today’s financial market as an anchor firmly tied around the legs of the innovators who could find out what a company’s customers dream about and make their dreams come true. This is exactly what’s happening with space tourism today. While the powers that be at NASA are going to have their fair share of political battles to make it happen, the agency is very interested in partnerships with entrepreneurs who could deliver a working space plane and significantly cut launch costs. And as the price of space travel comes down by economies of scale and amortization of launch system and spaceport costs, other ventures could easily be in the works. Oh and did I mention that hundreds of people are lining up for space plane tickets already?

When the stock price and a lack of real vision beyond boosting that stock price within a certain time frame are more important that innovation and trying to do real, ambitious projects that might not pay for themselves for a while but will ultimately build new markets and create new industries, progress grinds to a half. All we end up doing is packaging and repackaging the same stuff and pretending it’s worth more every time we put in a new bond or stock. Wall Street should be putting its billions towards bankrolling creativity and ambition, looking to the economy of the future and the companies poised to create it. Corporations sitting on cash should use it to fuel ambitious R&D projects that tackle complex needs. Instead, what we have is a banking culture devoid of imagination and risk-averse companies which only care about market share and financial PR. Vision? What vision? That’s for dreamers and eccentric rich people. They’ll just stick to doing the same thing day in, day out and giving their routines big, flashy names like “the knowledge economy” just because workers send e-mails instead of memos and letters around the office, and the R&D department is allowed to try something once in a while on a budget that’s slashed at the first hint of Wall Street’s dissatisfaction with the quarterly report.

[ illustration from a piece by Ismail Kemal Ciftcioglu ]