The Changing World Economy

The world’s economy has changed dramatically in the last twenty years or so. Computers have changed the modern workplace and software has replaced entire categories of workers. Automation has altered manufacturing and now companies make more products at lower cost and with fewer workers. Globalization has allowed companies to shift manufacturing overseas. International competition and low cost international shipping has created a glut of low cost clothing and consumer goods. And the internet has altered the commercial landscape, and internet merchants, like Amazon.com, have displaced brick and mortar stores in many categories.

I would hazard that the world’s economy has changed more in the last twenty years than in any previous twenty year period. These economic changes have caused a number of other changes in the economy, in politics, and in society.

The first and most obvious changes are in employment and the modern workplace. Computers and software have eliminated millions of typists, secretaries, clerks, bookkeepers, draftsmen, and many other careers. Many people lament the loss of manufacturing jobs to outsourcing and overseas competition, but far more jobs have been lost to automation. Most people may not realize that the United States is still the world’s largest industrial manufacturing nation, but we make more products – when measured by value – than ever, but we do it with far fewer people. From the end of World War Two until the late 1990’s, manufacturing employed between 15 and 20% of the U.S. workforce, but since 2000 than number has slipped to just under 10%.

These changes in employment are a large part of the reason that economic recoveries in the last two decades have been so shallow and slow. There are fewer and fewer jobs, and often, when a slowdown hits, a company will lay off workers and incorporate new computers or software or automated equipment, and then when the economy recovers the jobs don’t return. This means that overall employment rates are going down, and it also means that good paying jobs are harder and harder to find. And this change in the structure of employment accounts, in part, for the growing disparity between rich and poor. A company that is selling as much but with fewer employees has more money for executives and shareholders. And so the gap between rich and poor widens.

These changes in employment and the overall changes in the economy are having a profound impact on society. Young people have fewer opportunities, and a growing sense of disillusionment springs from that. Youth unemployment is high and this often leads to a variety of social ills like increased drug use. Single motherhood is partly a product of the fact that in some poor communities there are fewer and fewer men with stable jobs and good future prospects, so more and more women chose to be single mothers. But single motherhood is also a major contributor to poverty. So single motherhood is both a symptom of the changing economy, and a major contributor to poverty.

These changes in employment trends are also having an impact on politics. Young people are frustrated and dislocated, and older people see these economic changes and are concerned for the opportunities of their children and grandchildren. People in the job market have come to learn that they are fungible, that they can and will be replaced by business owners who only care about the bottom line. People are frustrated and feel dislocated and adrift, and so they look for answers. Both the Occupy Wall Street movement of a few years ago and the rise of the Tea Party are a result of economic anxiety. Those with clear and simplistic answers have a receptive audience. Hence the rise of the Tea Party. Their answer is that every economic problem is and was caused by liberals and liberal policy, and so their solution is to stop, by any means, liberal policies and liberal politicians. This has added bitterness with an ugly undertone to the already fraught political environment.

These economic problems are not just happening in the United States, they are happening around the world. Economic growth has been stagnant in most of the developed world. Believe it or not, the US is one of the strongest economies in the world. You wouldn’t know that from watching the news, where it’s all doom and gloom, particularly on conservative and business news, but most of the developed world is in a period of extremely slow growth and austerity. And China, which has been growing significantly in the last decade, has had growth slowed dramatically in the last couple of years. It also turns out that much of China’s growth is due to government spending and not the growth of the Chinese private sector.

Recent riots and political instability across the globe are due, in no small part, to these economic changes. The clearest example of the connection between economic change and political instability is the Ukraine. Recent protests started when the Prime Minister rejected a trade pact with the European Union and instead signed an agreement with Russia. The protest that are threatening to destabilize the country are literally over national trade policy. The people see openness and trade with the West as the best chance for economic prosperity, and see alignment with Russia as an economic dead end.

There’s also little doubt that the Arab Spring of a few years ago – and that continues in mutated form in Egypt and Syria today – is about economic opportunity. Because of demographic changes, an exploding birth rate and improved medicine, the Arab nations skew very young, and because of technological changes noted above, have very high youth unemployment. The protests were initially sparked by the death of a fruit merchant in Tunis, Tunisia. He was a college graduate who was working as a street vendor because he couldn’t find anything better. He committed suicide (by self-immolation) after being hassled by police and local officials. His frustration burned over, literally. He felt that the people who were hassling him should actually be helping him and those like him. His fiery protest struck a chord with young people across the region because they all felt much the same frustrations.

In response to this worldwide trend and worldwide turmoil, we have politicians in the US who don’t even seem to recognize that this is happening. The vast majority of American politicians never mention these worldwide trends. I don’t know how you can address a problem when you don’t seem to recognize the cause. Certainly there are many contributing factors to our current economic problems, and there are many possible solutions. It is possible that some conservative ideas may be part of the solution, but I’m skeptical when politicians don’t address the broader worldwide trends, or specifically how their proposed solutions relate to the causes of our economic problems.

Another point to consider is that in this rapidly changing worldwide economy, we are actively competing with nations around the world. This should be kept in mind when we talk about possible solutions to our economic problems. Conservatives say that the solution to our current economic malaise is to remove government from the equation. That might be true, but when you look at those countries around the world that have the strongest economies, like China and Germany, they have a great deal of government involvement in their economies. Perhaps in theory it’s a good idea to let businesses operate uninhibited in the free market, but in the real world (and not the fantasy world in Fredrick Hayek and Rand Paul’s head), governments are heavily involved in the economy. How is an American company supposed to compete on an even footing with a French or Chinese or German company, when those companies have government support? Perhaps in the abstract the solution is to remove government support in all of these other countries, but that is simply not going to happen. To suggest otherwise is a naïve pipe dream. So how does limiting government help those companies competing with Chinese companies that are backed by the Chinese government?

So we have politicians who offer solutions that have little or no relation to the actual causes of our economic problems. And we have politicians trying to end government support for business at precisely the same time when our main worldwide competitors are ramping up government support.

We also have politicians who are spending an inordinate amount of time on issues that have absolutely no bearing on the realities of our economic problems. We have one group of politicians who are absolutely convinced that America’s economic decline is the product of America’s supposed moral decline, so they propose laws that they believe will reverse this supposed decline. Laws like restrictions on abortion or broadening gun rights. Meanwhile the leaders of other countries are actually addressing economic issues. They are building infrastructure to put people to work and to move goods around the country. They are increasing support for basic research, and spending money to improve their nation’s education. But we’re not. We’re fighting over trivia.

Most people seem to understand this. But it seems that most politicians don’t. They talk as if the policy solutions from the 1980’s will work to solve the problems of the new world economy. The reality is that 1980’s solutions won’t solve the problems of the 21st Century.

Author: Mike

I am a patent attorney in Lexington, Kentucky. My law firm web site is http://www.coblenzlaw.com. I ran for State Representative in 2010 and lost in the primary. Many of these posts are based on writing that I did for that election. Rather than delete it all, I decided to dump it onto the internet.

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