Declining Median Income, Adverse Demography and the Future of Capitalism
I have often talked about the necessity for some form of income support to maintain a functional society and economic system since we live in an era characterized by rapidly increasing automation of production and services, fewer well-paying jobs and a demographic profile tending towards negative growth. Let me explain the problem, once again, with some recent economic data.
A new report by the US Social administration suggest that the median per-capita income, for the year 2010, as reported by employers is $26,363.55. Yes that is not a misprint- 50% of wage earners (75.2 million individuals) in the USA make less than 507 $/week before taxes! This number does not include those who have no income because they have dropped out of the workforce, are too young to work, stay-at-home moms etc. Unreported income in the USA would likely add an extra 2-4 thousand/year to the median wage-earner income- but that is it.
However the most disturbing part of this report is the trend in individual median income and work-force participation over the last 10 years. There has been no increase in inflation adjusted median wages over the last 10-12 years, concurrent with a stagnation in the wage force participation (measured as a % of the population) even though the US population grew by over 30 million individuals during that same period.
The last decade was a lost decade for the median US wage earner- if he or she still has a job. Moreover this double decline (income and # of workers) marks a disturbing turn for an economic trend that began in the mid 1970s.
Now add in the issue of population aging. While the USA has one of the younger populations, as far as developed countries are concerned, it too has become noticeably considerably older over the last decade. It was 32.9 years in 1990, 35.3 years in 2000 and 37.2 in 2010. Hence, a larger percentage of the poorly paid working-age population is also older than before. Maybe I am wrong.. but older and poorer people usually have fewer new kids and usually don’t buy bigger houses and more stuff. Fewer and fewer young men are now marrying and getting on the slave treadmill, thereby starving the system of tools to play against each other. Now it is certainly possibly to run an economy for a decade or two based almost entirely on teaching, healthcare and bureaucratic jobs- but ultimately somebody has to do keep the underlying system at a functional level.. and women are not good at that sort of stuff.
The retirement for baby-boomers looms large, since they are starting to cross over into the 65+ age group with its numerous implications for medicare, social security and private pensions. Who is going to pay for greedy physicians and hospitals ever larger amounts of money for decreasing amounts of healthcare? The healthcare cartel clearly has not factored in things like Google, international travel, automation and the fact that failure to provide services might cause angry people to lynch them and their progengy. While paying social security is nowhere as big a problem as CONservative lies imply, it and most other “achievements” of the current version of western civilization are based on the continues existence of a youth and growth heavy demographic profile that no longer exists, or can be resurrected. Private pensions, of all types, are even more dependent on that type of magical thinking.
Which brings me to what I see as the core of the problem. The version of capitalism we live in today, whether it is in USA, socialist Western Europe or not-really-communist China, is built on certain assumptions that are simply not true today.
1. Capitalism, in all of its known forms, is a ponzi scheme that requires a naive, youth-heavy and disposable population to enrich the few. Ironically, communism required the same and the collapse of communism in eastern Europe occurred about a generation after people started having smaller families. Coincidence?
Now tell me- which developed countries are becoming younger and growing at rates approaching those seen say 60 years ago? Even many developing countries now have birth rates and life-expectancies that are essentially equivalent to developed countries.
2. Successful and stable capitalism requires ever-increasing amounts of money changing hands (increased aggregate consumption) but it’s very structure ends up concentrating money in a few hands (reducing aggregate consumption) thereby ultimately destroying the very condition required for its success and stability.
How can you make ever-increasing amounts of profits if you have increasingly fewer and poorer customers? Sure.. you can cook the books for a decade or so, but can you do it forever?
3. Most of the paid-out profits in capitalism are based on projections of future growth and accounting ‘techniques’. In the old days, real growth and technological advancement allowed the scam artists (capitalists) to paper over those discrepancies. Today the system does not have enough real growth or technological breakthroughs to allow the scammers to deliver on their promises.
So they are now effectively sucking blood (money) out of a body (system) which cannot produce more than what is being lost. The requirement for ever-increasing profit in capitalism is a form of parasitism which is totally dependent on the availability of a healthy and growing host to be be sustainable.
4. Successful and stable capitalism is also dependent on the vast majority of people in that system playing by unwritten rules that ensure a reasonably functional society. But would they still do so in face of falling incomes, bailouts for the rich, lack of social safety nets, disintegration of conformity-inducing family units and a general “screw others” attitude?
The information age (last decade) and the rapid decline of group conformity have increasingly created a cynical, detached individual who is only looking out for himself or herself. While the possibility of large-scale and outright violent confrontation has decreased over the last 40 years, dysfunction by a billion small passive-aggressive cuts is a real possibility.
In some ways the current problems are even bigger and more systemic than what Marx foresaw. The systemic defect lies in the underlying system that gave rise to all versions of capitalism, communism, feudalism etc. You simply cannot run a technologically advanced and steady-state society by the paradigms, means, rules and institutions we are familiar with. Nor can you turn back the clock..