The Pandemic Is Accelerating Trends That Are Disrupting The Foundations Of The Economy
The
Pandemic Is Accelerating Trends That Are Disrupting The Foundations Of The
Economy
by Tyler
Durden Wed, 08/26/2020 - 09:50 Authored by Charles Hugh Smith via OfTwoMinds blog,
The problem is the economy that's left has no means of creating
tens of millions of jobs to replace those lost as the 1959 economic model
collapses.
Fundamentally, the economy of 2019 was not very different from the
economy of 1959: people went shopping at retail stores, were educated at
sprawling college campuses, went to work downtown, drove to the doctor's office
or hospital, caught a flight at the airport, and so on.
The daily routine of the vast majority of the workforce was no
different from 1959. In 2019, the commutes were longer,
white-collar workers stared at screens rather than typewriters, factory workers
tended robots and so on, but the fundamentals of everyday life and the nature
of work were pretty much the same.
Beneath the surface, the fundamental change in the economy
was financialization, the commodification of everything
into a financial asset or income stream that could then be leveraged, bundled
and sold globally at an immense profit by Wall Street financiers.
This layer of speculative asset-income mining had no relation to the actual
work being done; it existed in its own derealized realm.
For decades, these two realms--the structure of everyday life (to
borrow Braudel's apt term) and the abstract, derealized but oh so profitable realm of
financialization--co-existed
in an uneasy state of loosely bound systems.
If you squinted hard enough and repeated the mantras often
enough, you could persuade yourself there was still some connection between the
everyday-life economy and the realm of financialization.
The two realms have now disconnected, and the real-world economy
has been ripped from its moorings, as patterns of work and
every-day life that stretch back 70 years to the emergence of the postwar era
unravel and dissolve.
The trends that are currently fatally disrupting retail,
education, office work and healthcare have been in place for years. When
I wrote my 2013 book about the digitized future of higher education in a
low-cost union of high-touch and low-touch learning, The Nearly Free University, all these trends were
already clearly visible to those willing to look beyond the models embedded in
the economy for decades or even centuries.
Visionaries like Peter Drucker foresaw the complete disruption
of the education and healthcare sectors as far back as 1994. Post-Capitalist Society.
The problem with this disruption is it eliminates tens of millions
of jobs--not just the low-paying jobs in retail and dining-out, but
high-paying jobs in university administration, healthcare, and other core
service sectors.
The last real-world connection between everyday life and
financialization was the over-supply of everything that could be financialized: the
way to reap the big profits was expand whatever could be leveraged and sold. So
retail and commercial space ballooned, colleges proliferated, cafes sprang up
on every corner, etc.
Meanwhile, financialization's unquenchable thirst for higher
profits stripped everything of the redundancy and buffers required to stabilize
the system in times of crisis. So hospitals no longer kept
inventory because by the logic of financialization, all that mattered was
maximizing the return on capital--nothing else could possibly matter in
the derealized realm
of speculative profiteering.
Now healthcare finds itself trapped between the pincers of
financialization's stripmining and the collapse of retail in-person demand--the
financial foundation of the entire system. Under
the relentless pressure of financialization's stripmining and profteering,
healthcare only survives if it can bill somebody somewhere a staggering amount
for everything from office visits to procedures to hospital stays to
medications.
Once that avalanche of billing dries up, the entire sector
implodes: a sector that accounts for almost 20% of the U.S. economy.
Higher education is also imploding, and for the same reason: its
output no longer justified its enormous cost structure. The
same can be said of overbuilt retail and commercial space: the financial justification
for sky-high rents have imploded and will never come back. The over-supply is
so monumental and the collapse of demand so permanent, the gigantic pyramid of
debt and speculative excess piled on all these excesses is collapsing.
A bailout by the Federal Reserve won't change the fundamentals
of the collapse of financialization; all the Fed can do is reserve scarce
lifeboat seats for its billionaire banker-financier pals. (Warren, you know
Bill, have you met Jamie, Jeff, Tim and the rest of the Zillionaire Rat-Pack?)
Despite the record highs in the stock market--the ultimate
expression of financialization disconnected from the real-world
economy--financialization is also imploding. Financialization
still claimed a connection to the real world of income streams and the value of
the collateral underlying all the speculative profiteering: the high rents paid
by the restaurants on the ground floor and the businesses for office space
above justified the high value of the collateral, the commercial building.
Foundational swaths of the real-world economy have been swept
away, and so the collateral is largely worthless. Lots
of people want their employer to start paying for business-class airline seats
again so they can jet around the country on somebody else's dime, staying in
pricey hotels and attending conferences, but these activities no longer have
any financial justification.
The economy of 1959 is finally expiring. The
enormous time and money sinks of transporting humans hither and yon no longer
have any financial justification.
The problem is the economy that's left has no means of creating
tens of millions of jobs to replace those lost as the 1959 economic model
collapses. We all know that automation is replacing human labor, but
the real change is the collapse of the financial justification for the
enormously costly systems we now depend on to generate jobs: healthcare,
retail, tourism, dining out, education, working downtown, and all the
professions dependent on managing all this complexity.
While the elimination of low-skill jobs--a longstanding
trend--is attracting attention, the implosion of the 1959 economic model and
financialization will soon sweep away millions of high-paying professional jobs
that no longer have any financial justification.
As the 1959 economy implodes, so does the tax system based on
payroll taxes and property taxes. This article sketches out
the perverse incentives for employers to invest in automation rather than hire
workers: Covid-19 Is Dividing the American Worker (WSJ.com)
There are alternatives, but they require accepting the implosion
of both the 1959 economic model and its evil offspring, financialization.
I sketched out an alternative way of organizing work, everyday
life and finance in my book A Radically Beneficial World. There are alternative
ways of organizing civilization other than the insanely wasteful and
exploitative system we now inhabit.
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