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Cycles in the economy & politics, & outsourcing

The thread on outsourcing employees provokes this post. I urge everyone to stop planning the JOS for Convicts fete and listen up. ;-)

A while back I waded through an excellent, if dense book on the subject of "fashions" in economic distribution. It is "Wealth and Democracy" by Kevin Phillips. I highly recommend it for a macro view of how the US economy has operated throughout history, not just the last 50 years.

The main point of this book appears to be that the US economy has a long term sort of economic and political cyclicality built into it. Our country has swung through several phases in which certain segments of the population are favored and some support the favored segments. There are many technical aspects to the actual mechanism of this redistribution of wealth but they tend to be governed by the general mood of the day.

Most recently: in the 20th century, the economy crested to a "gilded age" through the late 1920s and early 30s, characterized in one axis by an extremely high ratio between the income of the "average rich" and the middle class. The Depression broke the back of this prosperity, and the populist movement back to favor of the workingman was ascendant with FDR's new deal.

The crest of middle class prosperity *was* the 1950s and early 60s, fueled by tax rates that favored the middle class and which were confisticatory for the wealthy. My brothers (in their 50s) recall some neighbors in a very blue collar middle class suburb in Ohio having maids and housekeepers. And we're talking people living in Levittown style ranch houses, not even in business for themselves.

One key to this *was* tax rates. This book has a chart (p 96) showing the effective federal tax rate for the median family income vs. the top 1% (millionaire's) family income.

In 1960, the median income family tax rate was 5.5%. The top earner's bracket was 85.5% (!!)

In 1980, the median income tax was 23.68%. The top earner rate was 31.7%.

In 1989, the former was 24%. The latter was 26.7%.

While momentum has slowed in movement of this statistic, it shows an interesting trend. Even though the middle of the last century is thought to be the pinnacle of culture and achievement for "rich white guys", it turns out that being affluent had a heavy penalty associated with it.

This is not the only such cycle. The country has gone through similar cycles of economic populism, then "weathism", then fallback to populism due in part to some economic collapse, from colonial days to the present.  My take is that present cycle is longer than all previous such cycles, since it essentially started around 1930.

I see outsourcing as an extreme manifestation of this aggregation of wealth. It's the ultimate wet dream of a board of directors: to squeeze out all "costs", even the costs associated with funding the population that buys other stuff in your local economy. It's an added dimension beyond merely manipulating the tax rates or inheritance taxes.

And like all cycles, it may (probably will) have an "end game." As stated in the outsourcing thread, the rich living in their enclave need someone to work on their pool, their car, etc, and those people in turn need places to live and to buy things.

Another obvious indicator is our leaders. This country elected George Bush, about the most obvious spokesperson for an arrogant "I cannot be bothered with little people" oligarchy that one could imagine. I cannot even imagine anyone more insensitive and less clueful about the burden to the middle and lower classes of even a mundane expense like health care and insurance, not to mention the costs of outsourcing the means of income of much of the middle class. This is a man, like many politicians, who has *never* had to compete for ANYTHING -jobs, women, political opportunities. It was all essentially given to him, in one way or another.

So, Bush almost without doubt feels nothing visceral about the lives of average people when it comes to just getting by.

True, Bush has probably acted more temperately and wisely than another leader might with respect to terrorism. But in the larger picture, you *need* a healthy middle class in order to pay for colonial wars of attrition.

My guess is that our country's present course will end up *very* badly, with a huge snap-back to populist economic policies when conditions become intolerable.

As far as the flush of prosperity that Indians and others are feeling, as call centers and IT operations move to these countries... my bet is that it eventually turns out exactly like the dot bomb economy did here. IE: Those few qualified wage earners lapping up "huge" (by local standards) compensation, until... the local economy in those countries reacts by eventually oversupplying local business with trained candidates for call centers and programming. Just as was done here. After all, the point of outsourcing is not to make the locals "rich", it's to make the owners rich.

I realize I am painting with huge brush strokes here. But... opinions?

Bored Bystander
Friday, November 14, 2003

This just in, forty percent of software development jobs are now outsourced overseas:

http://www.silicon.com/management/careers/0,39024671,39116906,00.htm

Did that say forty percent? Indeed it did...

In UN related news tat has NOTHING to do with this, it appears that local state and federal governments are seeing a large decrease in tax revenue, resulting in an inability to provide basic services...

Ed the Millwright
Friday, November 14, 2003

I just want to clarify that this figure:
"In 1989, the former was 24%. The latter was 26.7%."

Is a vast oversimplification. The numbers you care about aren't the marginal tax rates, but the effective tax rates. I'm in the 24% tax bracket, but due to various deductions, my effective rate is less than 15%. A large number of people pay no federal income taxes or actually get tax grants.

And remember that outsourcing works both ways. What would you call the richest people in America if the maximum tax bracket was 75%? Visiting foreign nationals.

Philo

Philo
Friday, November 14, 2003

Careful, you'll scare the westerners:
"user organisations... over two fifths farming out to a range of countries headed by India."

This means 2/5 of the orgs use offshoring somewhere in the org.  Not that 2/5 of the jobs are gone.

anonymous
Friday, November 14, 2003

Bored,
That economics book sounds interesting.
I think the off-shoring trend could destroy the US. The rich corporations don't need Americans to buy stuff. Why not sell to the off-shore people they are hiring? Why should they care about the US middle class?
When the average American can no longer buy a house, educate their kids, afford health insurance; when the middle class no longer supports social programs, defense, etc., with their income taxes, then the country will basically fall apart -- but why worry? Rich people can go and live anywhere they want.
One problem might be that the US military is the main thing keeping order in the world (what order there is), and is supported by the US middle class. So destroying the middle class might not be such a good idea. Maybe the rich corporations can develop their own independant military and really take over the world.

The Real PC
Friday, November 14, 2003

and note the Quality is one of the reasons for outsourcing.

doobius
Friday, November 14, 2003

Bored, great post.

As citizens and workers, it's interesting how little we understand what's going on at the Board of Directors & Government level.

In general, post September 11, 2001 it's interesting to see people's attitudes about the United States. Before we were impervious to anything - both militarily and economically. Now it seems we think that the sleightest provocation can topple our empire.

One wonders if this attitude has anything to do with the economy. "The economy sucks, therefore I should spend less money." It becomes a self fulfilling prophecy.

www.MarkTAW.com
Friday, November 14, 2003

Rome did not fall in one day....Enjoy the ride...


Friday, November 14, 2003

"and note the Quality is one of the reasons for outsourcing"

Apparently when you create solid specifications and leave your development team alone to actually work, you get a better product...

Philo

Philo
Friday, November 14, 2003

Mark,

Thx.

>> In general, post September 11, 2001 it's interesting to see people's attitudes about the United States. Before we were impervious to anything - both militarily and economically. Now it seems we think that the sleightest provocation can topple our empire.

This isn't the first time we've had the national introspective navel-inspection. Back in the 80's it was "conventional wisdom" that Japan and its yen would replace the US as the dominant world economy and the global currency. Going back farther, in the early 70s the national self esteem was about as low as it had ever gotten due to Vietnam and  Watergate. 

I think the "trick" is in distinguishing what is truly a symptom of "rot" and the entering of phases from which there is no escape, from normal tribulations. The dot com meltdown was a normal tribulation because it was just another sort of business cycle. The outsourcing trend, on the other hand, feels to me like a permanent collapse of the "good office jobs with salary" social contract, since it's saying that the only reasonable alternative for making a living is to be in business for yourself. The "knowledge worker" gig was going to save us all, and now it's pretty much been yanked in many cases.  It used to be the case that if you followed the market and invested in yourself with whatever the market demanded, you would be rewarded.  Today that self-investment looks in some cases like a sucker's game.

This kind of screwage of the population, over time, instills cynicism. Which is really the ultimate cost. If people don't believe that things can get better and that the system is ultimately fair, then the risk you run is that of those people becoming *very* desperate.

>> One wonders if this attitude has anything to do with the economy. "The economy sucks, therefore I should spend less money." It becomes a self fulfilling prophecy.

People protect themselves, and this behavior is not unique to the current economy. It's always been this way when times are uncertain.

Bored Bystander
Friday, November 14, 2003

The tax stuff is interesting. So Americans pay 'only' 24%? hardly! that's just the federal government's starting take. On top of that, you pay 15% social security tax on all your income if you are poor or middle class, but only on the first 70 grand or so if you are rich. Add them together, and you see that the middle class are in a higher percentage tax bracket right now than any of the ultra rich. Add to this 8-10% state sales tax and 5-14% state income tax, and 50% gas tax and so forth, and your total take home pay minus miscellaneous taxes can actually be only 30-40% of the cash income your employer shells out to keep you working.

Analyst
Friday, November 14, 2003

Don't forget that long term capital gains and dividends? (did that one go through?) are not taxed as highly as income in the U.S.

Devil's Advocate
Friday, November 14, 2003

"your total take home pay minus miscellaneous taxes can actually be only 30-40%"

That's true. But talk about Scandinavians and a 70% tax rate and watch people foam!

Anal Yeast
Friday, November 14, 2003

Even when the top marginal tax rates were near 90%, no one who could afford an accountant ever paid it.  The point was that the taxes the rich used to pay were really signifigantly higher than now, they just went through a whole lot more economically distorting moves to get their taxes to a reasonable level.

Basically I doubt the ability to redistribute wealth via tax policy, given a basically free market economy.  In the very near term the government can favor a group of people but after a few years of a given tax policy, the market for salaries takes care of it.  The really rich (not guys like me as some on the left seem to think) pay a high percentage of the income tax burden than ever, but possess an even higher percentage of the wealth.  I'm not against this.  I'm just pointing out the futility of it all.

As for those who think everything in the US can be outsourced to other countries leaving only rich people here and their servents, the stupidity of this notion is so astounding that one scarcely knows where to begin your economic education.  It is the same old tired and very incorrect argument people have made against free trade forever.  You are making the false assumption that there is some kind of constat sized pie of stuff that we are all fighting over.  The fact is that free trade increases the size of the pie and everyone can end up with.  Sure, you might need to change jobs to one in which we have an advantage, but really, job security has always been an illusion.

Name withheld out of cowardice
Friday, November 14, 2003

"no one who could afford an accountant ever paid it"

Yes. Being middle class always puts you in a tough spot, since you have enough that taxing you is worthwhile, but you don't have enough to pay for really good protection for your wealth.

Anal Yeast
Friday, November 14, 2003

As a moderate I really have to comment on the Bush stuff because I've seen that both sides of the political fence have become way too vitriolic in the past decade - and that's not good for anyone in this country.

Yes, Bush was a rich boy.  But so was Gore.  Looking toward the next election, Dean was born and raised on Park Avenue (not in rustic New England).

Take a look at our Senators and Governors. There's a lot more millionares in that bunch than working class stiffs.

Neither side of the aisle really goes out of their way to look after the working class.  Some give more lipspeak than others, but look to the special interests to see where their hearts really lie:

Bush: Haliburton contracts for Cheney's buddies.
Clinton: you hafta do NAFTA.
Bush: tax cuts for corporate dividends.
Hillary: Lured Tata Consultancy to Buffalo.

The list could go on and on.  Sorry, but no one in D.C. is really looking out for you.

Reality Bites
Friday, November 14, 2003

Bored, you're right. Being 28, I wasn't really around for the 70's and 80's, but the things you're saying do ring a bell.

The 20th century saw the dissolve of the pension system, which was another social contract. On the other hand, when did the idea that the company you worked for should take care of you once you retire start?

When did this "good office jobs with salary" contract begin? In the history of the world, my guess is it's just a small blip.

I would also gess that "screwage of the population" is the norm, as is a certain level of cynicism. In terms of history and the world as a whole, 20th century America, particularly the latter half, was probably the exception and not the rule. Just look at... almost any other nation in the world, or any other period of history.

This desperation and cynicism you're talking about is the norm. Just browse the CIA World Factbook (q.v.) and look at the economic conditions of any random nation.

Here's a quick reference of all the nations and what percentage of their population is below the poverty line:

http://www.cia.gov/cia/publications/factbook/fields/2046.html

going down the list we get: 30, 23, 37, 50, 49, 35.6, 22, 4, 33, 37, 70, 47, 22, 12.6, 45, 25, 70, 36, 48, 30, 80, 21 and so on.

The United States is 12.7, so most countries on the list are at least twice as bad as we are. India, btw, is 25%. I believe Romania has been mentioned as a potential outsourcing location is at 44.5%.

(I have to go or I'd continue making my point)

www.MarkTAW.com
Friday, November 14, 2003

MarkTAW: if I recall correctly, the definition of "the poverty line" is different for each country, so comparing those figures is like comparing apples to oranges.  It's possible to get by with, say, $1000 a year, if the prices for food, housing, and services are much lower in that country even if the prices for imported items (cars, electronics, etc) remain the same.

Alyosha`
Friday, November 14, 2003

"National estimates of the percentage of the population lying below the poverty line are based on surveys of sub-groups, with the results weighted by the number of people in each group. Definitions of poverty vary considerably among nations. For example, rich nations generally employ more generous standards of poverty than poor nations."

not afraid to look stuff up before posting
Friday, November 14, 2003

I saw some show about how rich Puff Daddy is on VH1 last night. His personal trainer makes $500,000 a year. The guy who cuts his hair makes $7000 a week. He flew all of his staff and all of his friends to morocco for 5 days to attend his 30th birthday party.

I guess when the economic fabric of the united states unravels to become a land of serfs and masters, just remember to choose the right billionaire to work for.

wormser
Friday, November 14, 2003

The "poverty level" in the US is a load of crap and it surprises me how infrequently people question it.  I wish I had the reference handy but I think it was made up, arbitrarily in the early 1960s by a sociologist (or other such pseudo-scientist) as an example- the number was never meant to be taken seriously but politicians latched on to it and increased it by the CPI each year.

Name withheld out of cowardice
Friday, November 14, 2003

"Now it seems we think that the sleightest provocation can topple our empire."

What empire?

Jim Rankin
Friday, November 14, 2003

Also, I posted earlier that salaries increased 14% in India last year.  Anyone less lazy than me want to calculate how long that can continue before Indian developers cost more than Americans?

Jim Rankin
Friday, November 14, 2003

Rule of 72: 72/14 ~= 5.  So salaries would double every 5 years. However, 14% is unlikely to hold.

anon
Friday, November 14, 2003

"I saw some show about how rich Puff Daddy is on VH1 last night. "

Yeah aint that something.  The majority of people who keep him living rich are the same people who probably are below or just above the poverty line.  Americans definitely don't have their priorities straight.

Cletus
Friday, November 14, 2003

BoredB,

I'm not a Kevin Phillips fan - he is a regular commentator on NPR, who generally starts and ends something like this: "I'm a Republican, but not _that_ kind of Republican - more like a T. Roosevelt or Lincoln Republican, yadda, yadda, ..."

Whatever.  But, your cycle commentary gets my vote.  And I was a youngster in Pittsburgh when US Steel and J&L used to reign.  There are no mills in the Steel City any longer, but life goes on.  And that isn't to say that life isn't painful.  People adapt, cycles swing.  Good call on the Japan rules/early 80's mentality - twas so true, and seemed so true.  And there were plenty of people ready and willing to make some really bad policy out of nothing but fear.

To note that Bush never had to work for anything - well, that's probably right on the money.  Nor did he have to fight in Vietnam - he was keeping the border of Mexico safe, flying F-104 on the border.  No wonder he took so lightly the criticism on Iraq - from experts, and in my guestimation Powell, and dismissed it.  Even his own father made the case for not invading Iraq years ago - oh, my...

But back to cycles.  Outsourcing just isn't the threat the members here think it is.  Its your (I'm speaking in the collective, not BB "your") threat, and so all the hubbub.  But sorry, in grand scheme of GDP, wealth and opportunity - this isn't even a speed bump.  The only thing that makes this seem significant at all is having come off the bubble highs, which always make the lows seem that much deeper.

I've offered nothing but opinion here - and recognize that.  And, nope, I'm not going to even bother offering any stats as to the state of software in the US.  However, K. Phillips often  offers lots of statistics, and draws really bogus conclusions from those statistics - most disturbing of all is the background radiation which emmanates from him of "we're all just victims of the system/man/etc."  -- I find that pathetic.

Finally, a more interesting commentator of the ages would be Jim Cramer - and if you listen to him, you might just make some money off the system - rather than be a victim. Some thing practical like cold hard cash off a nice short play (I'm thinking Scientific Atlanta looks pretty ripe).  Now I'm the man.

Gotta go work - for the man...

hoser
Friday, November 14, 2003

In the interest of efficiency, please allow me to respond to everything posted here in short order:

1) The free market is great. Unfortunately, people are not commodities. The nature of people, especially their unique/individual/spiritual/etc. characteristics, is completely ignored by any calculation involving labor. Thus outsourcing decisions (NAFTA, Asia, etc.) are easy because there is absolutely no human cost factored in.

2) Both parties are indeed incompetent and disingenuous. However, the Republicans have actively returned wealth to the rich whenever possible. This is fair economically speaking, but completely opposed to building a moral society--a complex issue that seems insurmountable when the right calls tax cuts for the rich (e.g., dividend/estate tax cuts) "tax relief to working class families" while the left cannot eloquently demonstrate what our taxes even go for.

3) You all need to get over this "social contract" stuff that involved working cradle to grave at a Fortune 500 firm. Go out and read "the Brand You 50" by Tom Peters. Basically, he claims that we've turned the clock back 100-200 years to when people made their living on how good they were at some trade and how well they sold themselves--i.e., you're only as good as your last project. I couldn't agree more. The sooner we accpept responsibility for our own lives and careers, the sooner we can stop complaining about "the man" and laughing at Dilbert.

4) Clinton was mostly a mediocre president and did do several things that hurt America. However, Bush has hired a lot of people in his administration that have made a life-long career out of hurting people. The trend of his administration has been to hire officials who all think of themselves as above the law. Basically, every person who worked under Nixon/Ford/Reagan/Bush Sr. and who espoused the ideals of combatting evil by supporting dictators and the purging of dissidents through mass murder has come home to roost. The who's-who of shadowy figures, once your start adding them up, doesn't make for a compassionate administration like the kind he claimed he would build. His team makes Clinton's look like cub scouts.

5) The "poverty" line was, in fact, created by a Social Security Administration employee by the name of Mollie Orshansky (http://www.ssa.gov/history/orshansky.html). He poverty threshold calculations were so incredibly comprehensive that it's foolish to dismiss them on a whim. Debating her work or the use of her formulas is one thing, but she seems to have a done a scientifically sound piece of economic work. Cut her some slack please. Estimating povery is terribly complex and inconsistent in many cases because poverty for me will certainly not equal poverty for you. However, her work directly addressed these inconsistencies in many reasonable ways. BTW, wouldn't poverty calculations in different countries necessarily be an apples to oranges calculation? If they weren't I'd be suspicious. As long as each country does a diligent job with their estimates, I'd tend to trust them enough to make loose comparisons.

6) Those who think we will just "cycle" our way through this trough are probably right statistically speaking. However, we should be smart enough by this point to take a look out the window and see where we're going. Mostly, capitalism and the free market is effective face paint for the monster of globalization. Now that we've spent the better part of the last 30-40 years softening up the developing world, we can now use our multinational companies to suck their juices through a straw. Don't doubt my crazy analogy until you Google yourself. Truth is always stranger than fiction.

StickyWicket
Friday, November 14, 2003

"This just in, forty percent of software development jobs are now outsourced overseas"

Err, no. The stat was that 2/5ths of the organizations surveyed outsourced something. From the article:

"41 per cent are now going down the outsourcing route, using consultants, contractors and others in addition to outsourcing companies"

I would wager that the percentage of large firms outsourcing would be as high or _higher_ back in the heyday : What do you think companies like Anderson, KPMG, CGI, etc, do? They "outsource". Virtually all fortune 500 make use of these firms in addition to their internal development.

That article was pure nonsense, and grossly took a largely irrelevant stat out of context. I also love the absurd interpretation of a correlation between turnover and "fewer opportunities", with it stating that Canada is at the bottom of the list (despite the fact that Canada's IT sector has been quite robust---out dollar is not stratospherically high like the US $ is, or rather was). Maybe I'm naive, but I'd attribute that to good working conditions and a loyal populace.

Dennis Forbes
Friday, November 14, 2003

"Now that we've spent the better part of the last 30-40 years softening up the developing world, we can now use our multinational companies to suck their juices through a straw."

Yea, developing countries like India are getting softened up to the tune of 14% annual salary increases.  China's not doing badly, either.

Not clear yet who will be sucking who through a straw 20, 50 years out.

Jim Rankin
Friday, November 14, 2003

"Rule of 72: 72/14 ~= 5.  So salaries would double every 5 years. However, 14% is unlikely to hold."

Only because long before they would reach that point American and Western European home grown labor would start looking a whole lot more attractive, especially when considering the inefficiencies inherent in offshoring important projects.

Jim Rankin
Friday, November 14, 2003

I'm back, and back to the point I was making, as StickyWicket said, as you look at the history of the working class in the world from Charles Dickens to the Enlightenment, the Middle Ages, Dark Ages, Roman times, etc. conditions in the latter part of the 20th century were rather strange.

Scientists, when talking about Global Warming, sometimes say that the relative predictability of the weather that we've enjoyed for the past few thousand years is actually strange, and this more unpredictable weather we're entering is more like the way things used to be. I tend to think that way about working and living conditions. As I said in another thread, how much quantifiable difference is there between Feudalism and Capitalism? Under Capitalism you can choose who you work for, and probably have a greater chance to pull yourself up by your bootstraps, but odds are it's just a prison of a different kind.

In other words, under Feudalism and under Capitalism, by and large you can't change the fact that you have to work. Maybe on an individual basis, but society as a whole has to work. Our work recently has been typically less back-breaking, and for fewer hours than was historically true, probably due to advances in technology. I.e. 5 hours in an automated Nike factory produces many more shoes than 5 hours of a Cobbler's time, but that doesn't change the fact that we have to work. As in any other period in history, the alternatives to working are being poor, or being rich. Capitalism then, is just another way of determining who is rich and who has to work.

Another comment on technology. It's through technology now, rather than military might that the rich stay that way today. Not only does 5 hours in the Nike factory produce more shoes than 5 days or possibly weeks in a 14th century cobblers, but Nike can advertise and distribute shoes now to a much wider spectrum of people than that cobbler could.

I'm not sure how the US / developing world scenario is going to play out. India and China are nation with a huge population, and stand to become economic powerhouses in the not too distant future, though from what I hear most of China is still rural. Still, several billion Chinese people wanting their MTV and cell phones is going to put a serious dent in the world economy, and someone has to make those products. Whoever controls the manufacture & marketing of those products will surely become very rich.

The question then is, will the United States continue to profit by manufacturing products in China if we turn around and sell those products back to China, or will they figure out a way (i.e. capitalism) to compete with with the American Corporations? Especially in a world where the name brand electronics items have brand names like Sony, Nokia, Hitachi, and Toshiba anyway?

One major benefit America has is decades of experience creating brand recognition and instilling a culture of desire. McDonalds, no doubt, has already dedicated millions of dollars to the study of how to adapt their brand strategy to the Chinese market.

Regarding the poverty level, I have no doubt that it must change from nation to nation. In a nation where the typical person doesn't wash their hair every day, whether or not you can buy shampoo wouldn't factor in, or in a nation where the culture allows for 20 people to live in an area 4 people in America wouldn't want to live in, that also wouldn't be a factor, or would factor differently.

In any case, it's not the poverty level specifically I was arguing, but that by and large, this cynicism and desperation is the norm, so arguments directed at the poverty line are missing the point. Maybe you disagree with one of my facts, but you're not addressing the argument as a whole.

Back to the subjects of cycles in the economy, the examples given - the 20's, 50's, etc. didn't really say anything about cycles.

"The crest of middle class prosperity *was* the 1950s and early 60s" doesn't tell me anything about these cycles, you're telling me this is THE peak, not one of many peaks. I'd like to hear more about these cycles, and what drives them.

www.MarkTAW.com
Friday, November 14, 2003

Re the comment that free trade increases the size of the pie - that's not actually established at all. From everything I've seen, free trade is mostly a matter of redistributing income from poor countries to wealthy ones.

In fact, some Indian commentators describe America's position as "unfair trade" because of America's refusal to reduce farm subsidies.

But back to the main point - India has 1 billion people and China 1.2 billion. As those nations catch up to the West, their civilisations will become the dominant ones. I think this will have occurred by the next turn of the century (2100).  Hopefully this will be good for our children and grandchildren.

analyst
Saturday, November 15, 2003

Good old Miss Millie Orshansky and her poverty line.  It's a useful measurement, at least it was when she created it, but it has acquired systematic error over the past few decades which renders it largely useless.

Her methodology was to figure out roughly what percentage of family income went to food - about a third, at the time when she did her surveys - to compute a minimal food basket which would fulfill a family's nutritional needs - and to therefore triple the cost fo the food basket to get the "poverty line".

The problem with this is that food has become cheaper over the years since she created her measurements.  Technological progress has made farms far more productive, and the government has subsidized food production a great deal in order to, with limited success, keep the small "family farmer" in business despite competition from massive argibusinesses.Any Indian will tell you that we have lots of food in the US, which is why we're such a bunch of fatties - got a few dollars, you can eat, whereas an Indian with a few rupees doesn't get to eat. 

Food is cheap now, and most people who go hungry aren't just hungry because they're poor - they're hungry because they're poor and also lack access to food preparation facilities and are forced to purchase more expensive prepared items (check out Barbara Ehrenrich's Nickle and Dimed for details on malnourished car-dwelling laborers who live on corn chips and the like).  A days worth of rice and beans can easily be bought for less than a buck, provided that one has a hotplate or a stove to set up a cookpot.  In other words, to go hungry in the US you usually must lack appropriate housing as well - which is the real problem.

Technology can give us cheaper food, but not cheaper land - this isn't something that can be mass produced.  Furthermore, although there is no numerical shortage of land or even housing in many areas, prices have been driven up by various speculatory mechanisms.  There is a housing bubble going on where people are buying houses and paying a price that is not at all justified in terms of the utility of the residence, but is based on being able to sell the house for a large profit in the future.  The current low interest rates have become "capitalized" into home prices - people are willing to pay more for a similar house because they can make the same monthly payment on a mortgage with the lower rates.  This bubble will collapse soon - it must collapse - at the very latest, as soon as the Fed is forced to raise interest rates many homeowners will find themselves "upside down" - owing more on their mortgage (perhaps increased in price if an ARM) than their house is worth (lacking the interest rate capitalization).  But for now, for the past decade or so and maybe for a few years to go, housing is scarce. 

Pressure on owner-occupied housing prices drives people into lower-income rentals which in turn rise in price due to demand.  Cheap apartments may in fact be a "Giffen Good" where demand rises as their price increases - because now their occupants can no longer save money for a down payment to move out. 

Whatever the cause, rent is the major expense facing most families right now and a food-based "poverty line" is merely a distraction.  This isn't even taking into account health care or education costs.  Miss Orshansky did her work long ago, when times were different.

Trollumination
Saturday, November 15, 2003

"Bush: Haliburton contracts for Cheney's buddies."

Give me a fucking break.  This Halliburton thing is tired, worn out, and useless.

Halliburton is hands down the market leader in its field of oil infrastructure development.  If you don't believe me, read that always-heavily-biased rag, the Economist. 

So were we supposed to hire another, less-able company, just to appease the Bush-bashers?

And let's not drag out the "closed bidding" strawman, either.  Halliburton was already under a super-contract to survey oil field infrastructure in Iraq, one which they won years ago in open bidding, so they were frankly the logical choice.  Again, what was the alternative?  Open the bidding to a company without the specific expertise, and without the leadership?

trolling for halliburton
Saturday, November 15, 2003

... and I thought we were beginning to get out of the slump.

This theory of mine was partly based on a slightly more upbeat JOS of the last couple of weeks (since contractors/independents are usually the first to notice a change of course in an economy).

That’s the funny thing about this recession – it seems to get better, then it turns out even worse than you thought…

Michael Moser
Saturday, November 15, 2003

> check out Barbara Ehrenrich's Nickle and Dimed for details on malnourished car-dwelling laborers who live on corn chips and the like <

I'll second that recommendation, that was a very good book.

www.MarkTAW.com
Saturday, November 15, 2003

Trollumination,

I disagree there is a land shortage. Have you flown across the US recently? And in the small areas where houses do exist, the density is very low - townhouses are nearly unheard of and houses for single families are much bigger than they can manage.

In many parts of the US, an acre of land and a decent trailer can be acquired for $500-$2000, or financed for a low monthly payment of less than $100. The trouble is the homeless folks don't care for the weather or cultural opportunities in these areas, nor do they fancy the idea of working their own land as that would entail a break from their desired TV watching schedule.

Rural Resident
Saturday, November 15, 2003

"Open bidding"

you gotta be f*&^^%%^ing kidding me. How old are you? 10?

o'my
Tuesday, November 18, 2003

THE NATURE's WAY

There are issues with outsourcing, but it is a natural phenomenon, just like gravity,

"if you throw something up it oughta come down"

It is natural that the move to a cheaper locale for outsourcing services or manufacturing. This is something that would happen until such time the balance is achieved, It is nature's way of handling things.

Government should not do anything other than maintain law and order. If that is achieved, the invisible hand would take over and do the needful.

If you have followed history, the strength of United States, is in its basic sciences, no country can claim anything near to what the US has achieved, and that is where it still shines and will shine for many more years.

Japan was said to innundate the united states with Toyota Cars and Sony products. Now it is time for the Chinese companies to do the same. The results have been that the economy has survived, it brings about something new, something pragmatic, that keeps the economy growing.

The toppling did not happen, it is because of the strengths in basic sciences, Japan, China are application science masters, give them a technology they will put it to use, Give them a science they will work on.

The Microprocessor is an American invention, so is the transistor or the Integrated Circuit, So are many of the basic things.

If you had asked somebody before 1991 as to what it meant to be connected and share information in one large web of networks. They would have scoffed at your remarks.. Maybe a few soothsayers like Negroponte would have commented on the same, or would have Toffler in their seminal works.

The knowledge economy is going to stay and would produce enough for everybody to share. It is just a begining, people would start demanding more information and that would make a big difference.

There are always hitches and a few lost opportunities. Job losses are part of it, but humans have endeavoured and  have found ways to improve and adapt to the environment. This will happen, the new breed of people would continue to change and adapt, it is necessary that you keep with technolgies, things that you use on a every day cycle.

The change would happen where you learn to learn fast, to keep up with the changes, this is the economy of tomorrow. You have to adapt to change and the only permanent thing will be CHANGE.  Just wake up to reality and move and the human intellect is well endowed to take the challenge.

I started out with a background in economics, changed myself to sell hormone markets, worked as a banking assistant, Network engineer, Process coordinator and what not. I work as an infrastructure manager now. I dont know if the opportunities are such that iam chucked out of my job, i would enable myself , reeducate and maybe try and grow orchids or vegetables. It is all possible, just remove the mental block that there is no opportunities, they just need to be looked into and the opportune moment has to be taken advantage of.

Cheers.

Whatever happens is for your own good. THink of how bad it could have been if not for what you have now.

Eternal Optimist
Tuesday, January 13, 2004

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