All posts tagged economy

The New Normal

A few weeks ago 60 Minutes aired an interesting and insightful segment on the rise and role of robots, and their impact on the job market. Despite the steady rebound of the U.S. economy, soaring corporate profits, and a strong stock market the nation’s unemployment numbers remain steadily high in the aftermath of the 2008 financial crisis. Initially this ‘new normal’ in the job market was seen as sign that companies have learned to operate and succeed in uncertain and tumultuous economic times by downsizing their workforces and thinning their labor expenses. Though the economy has rebounded, jobs have not, and this segment illustrates one of the unknown and growing factors which has attributed to the continued problem of joblessness in the country. Robots are cheap, efficient, and practical solutions for expanding economic growth in the U.S., especially manufacturing, while at the same time keeping costs to a minimum.

Opponents may decry this as yet another way for corporations to squeeze out more profits and deny workers fair pay. However, though the short term effects of such a transition to robotics may continue to hurt the job market, this should be a welcoming sign to the U.S. economy for a number of reasons. First, it has been a major catalyst and boost to the U.S. manufacturing industry which until recently has been steadily declining over the decades. Second, these new robots- though they may replace a worker- are eliminating the need for low-wage and low-skill jobs, thereby creating a need for more high-skill and technical jobs. Though these jobs may be less in number, they are more productive and pay better. This is the kind of job market we should we working towards, and not against. The simple and low paying manufacturing jobs of the past are gone, and will not come back. This is a practical fact that no company or political will say, but all know is true. Instead of burying our heads in the sand and hoping for companies to one day wake up and rehire the unemployed- which they will not- we must recognize the practical reality. We are going through the growing pains of a shifting economy. The quicker we understand this, adapt to it, and train our workers for it then we will be better off, perhaps not in the present but we will be poised for a better future.

This is a benefit and success for U.S. innovation, which has always been the main driver of our economic growth and success, both domestically and internationally. Though many may lament this new innovation, they should not  fear it but embrace it. It is not a threat to us or our workforce, these are not jobs we want, nor need. The real losers of this innovation are the low paid workers of the developing world, primarily India and China, and can bring about a turn of the tide in reducing out-sourcing and foreign manufacturing. By lowering the cost of production U.S. companies can reinvest in the U.S., hire skilled workers which will be trained here, and contribute to our economy. This new economy will require more investment in education and a better economic strategic plan, however it is a signal in the right direction and a positive new normal that we should embrace.

Competing Models

Nicholas Kristoff, of the New York Times, makes a strong argument against Mitt Romney’s suggested economic model. However, the argument is part of a much larger debate. Republican’s and Romney make a strong argument in favor of austerity and a Hayekian /Austrian School  economic model, while Democrat’s and the President have been in favor of a pro-stimulus Keynesian model of deficits and spending.

The evidence for, or against, both economic models have been illustrated in Europe since the global financial crisis. The GOP has embraced the austerity of Great Britain and other nations and has seen their economies shrink and remain stagnant, while the US as other nations embarked on stimulus spending and are showing signs of GDP growth, however minimal.

In the last few years, Germany and Britain, in particular, have implemented precisely the policies that Romney favors, and they have been richly praised by Republicans here as a result. Yet these days those economies seem, to use a German technical term, kaput. Read more…