30 August 2009

The Future: A Speculation

Take heed of the above title. The following is written primarily in the spirit of speculation rather than any confident prognostication. My grades in college macro- and micro-economics were not high enough for anyone to take what I am about to write without a large dose of salt.

We are now 21 months into the current recession (adopting the estimate that the recession began in December 2007). Some economists and pundits have interpreted a number of key economic indicators and measures to mean that we may have begun to emerge from the recession, or at least are approaching the bottom. Note the number of qualifiers in the previous sentence. It also appears that foreign economies have also begun to emerge from the global recession.

I am heartened by this news, and continue to be optimistic that the global economy will experience a measure of recovery throughout the remainder of this year and will be well on its way back to normalcy sometime in 2010, largely due to the efforts of political and economic leaders who intervened to avert a more serious crisis.

Nevertheless, I have lingering concerns about the employment prospects for the near and long term future. I will point you to two articles, both in the spirit of serious reflection, but one obviously a little more fanciful than the first. See here and here.

The first article, from The New Republic, notes the potential for a "jobless recovery," the concept that businesses and industries may return to former levels of activity, but without rehiring many of the workers who were fired during the worst part of the recession. I tend to agree with this prediction. I believe that recovery may be slow going at first, and that employment will lag far behind other indicators of economic progress. Some firms may return to previous levels of activity, but will have grown accustomed to doing more with less. Those who remained employed will have become very productive in their efforts to impress managers and keep their jobs (I can personally attest to this). Therefore, we will not see firms rehiring at former levels. Of particular concern is that the major driver of the American economy, consumer purchases, may remain lower for the foreseeable future. (See here). Without consumer purchasing as a driver, both here and abroad, major commercial businesses are unlikely to invest heavily in additional employees. If the American economy does not find another key driver of progress (green energy is generally thought to be the most likely candidate), look for sustained high unemployment for many years to come.

The second article, from the Washington Post, reflects on the growing (and coming) displacement of workers with computers and other machines. This is often a great boon to most of our lives, due to increased convenience and less human error (think of an ATM or making plane reservations online). However, it comes at a cost. Those ATMs replaced real humans who were bank tellers, and websites like Travelocity and Expedia practically decimated the demand for human travel agents. To put it crudely, the ongoing march of technology will make large numbers of Americans unnecessary and unemployable in the economy. The difficult decision is what comes next. Faced with a large underclass of unemployables (who are growing older due to better medical care), the stark choices presented us will be: higher (and more progressive) taxes or let them starve. Taxing the haves at high levels in order to redistribute to the poor is, of course, a matter of the social contract, but also a means to maintain social order. Nevertheless, it will be difficult and controversial.

I don't mean the above ruminations to be a downer. I do not consider myself to be one of the doomsayers, constantly afraid of my own shadow (and those of others) and seeing the end of the republic around every piece of negative news. Nevertheless, I believe that the near- and long-term future will present us with a stark set of choices about how we will react to the plight of our countrymen, and it is one that our political and popular discourse is ill-adapted to handle well.

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