It is time to stop quivering in our boots in pointless fear of the future and just roll up our sleeves and build it.
- Ray Pierrehumbert

Saturday, July 2, 2011

The Requisite Kluge

Following up on my economics series. Previous installments:

Essentially, I have been looking at the growth economy from the point of view of employment. We have found that, contrary to the expectations of improved efficiency, employment went up during the late part of the twentieth century, especially in America. I argue that this is because of the individualist perspective of Americans, ironically promoted by corporate interests, whereby it was impossible for wage earners to hold onto their gains in the face of a growing wage-earning population. Accordingly, a sort of cheap-labor economy emerged that centered on replacing housework with low-skilled services (cheap restaurants) and retail positions.

The problems of success did not end there, though. The creative foment of capitalism found ways to replace more jobs with machines (as expected) or to ship jobs overseas (perhaps less expected) thereby weakening demand for labor (and crippling the power of private-sector labor unions). At this point, the expectation of one job per household was breaking down, and an expectation of two or even three jobs per household was emerging. Social pressures weren't just limited to the approval or admiration of neighbors - living in a less desirable neighborhood meant sending your children to incompetent and dangerous schools, putting massive pressure on their future earnings. The demand for income was tied into the safety and prosperity of offspring. It wasn't optional for most people. Note that this is tied directly into inadequate delivery of social services, specifically education. Demand for cars and various support services also can be stimulated by locating the best neighborhoods far from the best jobs. And of course, this can be taken further by rolerating collapse of urban cores, forcing populations outward, and thereby encouraging new construction employment.

So it was that the "morning-in-America" years of the Reagan administration in combination with the entrance of women into the marketplace began the break between the period of growth due to demand to the period of grow-or-suffer. People no longer climbed the ladder out of ambition or desire. People climbed the ladder for fear of being crushed in the chaos below.

America thus began its descent into third-world status; the first modern country in which civilization actually declined. The re-emergence of superstitious, backwards literalist religions such as one expects from the rural backwaters of the tropics coincided, but perhaps was no coincidence. Voodoo economics brought back voodoo itself. The use of abortion as a tool of moralist absolutism was instrumental in distracting the population from its own interests. (See "What's the Matter with Kansas? How Conservatives Won the Heart of America" by Thomas Frank)

So employment was driven to a large measure but by a frenzied demand for employment by employees; this in turn because of the deliberate fraying of the social safety net, which was in turn achieved by distracting the middle-American public from their own interests with manipulative and symbolic issues, a mostly shallow and retrograde religiosity, and fear of association with aliens, racial minorities, and some sort of caricature of beatnik-delinquent "liberals".

For a generation, this dynamic has spun out of control, with nobody further left than Bill Clinton or Barack Obama in the white house. (Which is to say, uninterrupted control of economic policy by moneyed interests.) The public demands "growth" as loudly as the corporate sector does. The corporate sector, because it is a machine designed to maximize profit. The public, essentially because it has been tricked by the corporate sector into lacking the imagination for a world where anything less than extremely hard work will keep your kids from falling into bad company and a career as a consumer of the criminal prosecution and imprisonment service sectors.

Of course, this unrelenting pressure gives America a competitive advantage over countries where workers did establish rights. Some aspects of the underlying ideology have been successfully exported as well. And some of America's issues with a racially distinct lower class have been exported to other western countries as well. So all these trends have, under American economic and social pressure, emerged in many other countries. Those countries would do well to reconsider.

But what was all this "work" about? If you looked around in the 1980s, you would find that most "jobs" were in retail, sales, or marketing. My brother-in-law, a machinist, had a little blue collar factory business in Chicago during this period where he outcompeted overseas competitors on agility. He could turn product around very quickly. What product was that? Custom plastic doodads for large corporate retailers!

If one person spends their life trying to convince you to buy Coke instead of Pepsi, and another does exactly the reverse, how is this different from the old public sector Keynesian ploy of
having one team dig ditches and another team fill them in? Clearly, no real value is added in either case. The only difference is that in one case the government is not directly involved. So according to the prevailing ideology, it is okay.

Whence the Red Queen's dictum: "Around here it takes all the running you can do to stay in the same place".

It was way back in my undergraduate days that, in thinking about this, I came up with "Tobis's Theory of the Requisite Kluge".

King of the Road will be able to picture the scene without any difficulty. I was sitting around Joe Galvin's room doing the usual sort of thing we did in Joe Galvin's room. I recall running the theory by Joe twenty years later and he saud he remembered the conversation much as I did.

I noted that recessions were being described as a "weakness of demand" and resulted in "excess unemployment", and that all it takes is a tolerance of absurdity to kill both birds with one stone. I imagined some national specification for a bizarre decorative gizmo, which changed annually. Everybody would be required to buy one and display it, on their lawn if possible, or in the apartment courtyard or on the roof if necessary. The entire streetscape would be festooned by silly things; say steam-powered flagpoles or pedal-inflated singing balloons or whatever. In years when employment was otherwise lax, the standards could be made more demanding. Voila! Full demand and full employment via a Requisite Kluge!

What I didn't reckon with was the genius of the marketplace. It turned out that government intervention was altogether unnecessary. Instead, the Kluge was developed and marketed without the necessity of the requirement. The enormous prosperity of the 1990s was largely based on the incompetence of Microsoft.

Note that if Microsoft had done a better job (and this will come back into our story in the obvious way with Microsoft's final, merciful decline in the 2010s) the 1990s boom would not have been as strong. Much of what you had to buy in the 1990s was workarounds and defenses for Microsoft's grotesque and bizarre design and engineering. Antivirus programs. Substitute shells. And even the stuff you didn't have to pay for chewed up your productivity (Trumpet Winsock! Yes, a miracle it worked, but how many hours did you sink into it before it did?) And of course, the things failed, and failed to keep up with increasing technology. I spent twenty dollars on a gizmo from Disney of all people to work an audio output through my parallel port. It eventually worked! But then it went off the market,and somebody else had the equivalent for two hundred. And on and on, one silliness and half-failed goofy external device or software patch after another. So why am I looking on this horror with such nostalgia now?

Because those were the boom years! Everybody was doing this nonsense. Even though there was no internet worth mentioning, we were fussing with Eudora. Gates thought TCP/IP was a weird protocol and he resented having to support it. It was hidden under several layers of whatever proprietary crap networking options Microsoft was offering at that time! It wasted time and money! And it was great! People were getting rich left and right. It was the triumph of the Requisite Kluge!

Things started to go sour in 2001 with the release of Windows XP, which was, while a fairly repulsive visual design, and somewhat oily and smarmy in its dialogs ("Would you like me to hold your hand?[OKAY!] [No, thanks, maybe later!]") actually usable as a computing device and an internet tool. Despite the attempt to revert to the lack of quality of Windows 3 with the later release of Vista, the emergence of actual useful things to do with the machine along with improved design made the Kluge phenomenon less powerful. But the clever marketplace had another trick up its sleeve.

--
Image: T-Shirt Humor of Austin TX, 2005.

9 comments:

Michael Tobis said...

No, I am not entirely serious, though it was awfully striking at the time. I don;t know how to find the numbers.

But when we next look at the housing bubble, we really can see the giant hamster going all out to sustain itself.

Grypo said...

The last two employment "booms", tech and housing, were a new kind of kludge. Both based on the over valuation of certain capital. The ditch digging metaphor fits even if we're talking about globally financed magic money.

Michael Tobis said...

That's the way I see it. Crediting Microsoft's incompetence may be going too far, and nobody takes a back seat to me to loving computers, but it was a bubble, and the housing thing was a bigger one.

The thing is, it;s hard to imagine an act to follow housing.

King of the Road said...

I think there's a "d" in kludge.

Dan Olner said...

Carrying on with the long string of barely-relevant-but-seemed-important-somehow quotes: of Billy Pilgrim's mother in Slaughterhouse 5 - "Like so many Americans, she was trying to construct a life that made sense from things she found in gift shops."

Holly Stick said...

Sorry, off-topic, but this comment is about your water supply:

http://www.realclimate.org/index.php/archives/2011/07/unforced-variations-july-2011/

Greg said...

I really think the particular insight
"If one person spends their life trying to convince you to buy Coke instead of Pepsi, and another does exactly the reverse, how is this different from the old public sector Keynesian ploy of
having one team dig ditches and another team fill them in? Clearly, no real value is added in either case. The only difference is that in one case the government is not directly involved. So according to the prevailing ideology, it is okay."
is brilliant, and needs to be spread beyond the (I'm sorry to say) limited readership of this blog.

There's one thing I'd like to add to it though. Probably everyone here has read the Peak Civilization article http://www.financialsense.com/contributors/ugo-bardi/peak-civilization (I probably originally got the link from MT's shared items). I posit that the "best" make-work/income system is the one that adds the least complexity and uses the least resources. So teams of ditch diggers/fillers with shovels are better than same with diesel operated machinery ... and there's a decent chance that those competing soft-drink marketers are better than either, so long as they don't drive Hummers to work. Of course, the make-work can actually have non-zero output - actually useful things could be built instead - but if we're going to consider zero-productivity cases, the best one would probably be to pay people for putting in a day at some online game. Farmville anyone?

Dan Olner said...

Coupla things. 1: Pepsi and Coke = no one firm can get monopoly prices by controlling supply. I don't see the comparison. Are you saying we should decide which commodities to make at the government level?

2. On digging holes: Keynes quotes below, which I read as saying, it's politically accceptable to use government policy to pay people to bury money and dig it up again, and it can be productive, but it's stupid. We should build houses instead, or do something else that will `increase our stock of useful wealth'. PDF.

Quote:

In so far as millionaires find their satisfaction in building mighty mansions to contain their bodies when alive and pyramids to shelter them after death, or, repenting of their sins, erect cathedrals and endow monasteries or foreign missions, the day when abundance of capital will interfere with abundance of output may be postponed. 'To dig holes in the ground', paid for out of savings, will increase, not only employment, but the real national dividend of useful goods and services. It is not reasonable, however, that a sensible community should be content to remain dependent on such fortuitous and often wasteful mitigations when once we understand the influences upon which effective demand depends.

//

It is curious how common sense, wriggling for an escape from absurd conclusions, has been apt to reach a preference for wholly 'wasteful' forms of loan expenditure rather than for partly wasteful forms, which, because they are not wholly wasteful, tend to be judged on strict 'business' principles. For example, unemployment relief financed by loans is more readily accepted than the financing of improvements at a charge below the current rate of interest; whilst the form of digging holes in the ground known as gold-mining, which not only adds nothing whatever to the real wealth of the world but involves the disutility of labour, is the most acceptable of all solutions.

If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.

//

Ancient Egypt was doubly fortunate, and doubtless owed to this its fabled wealth, in that it possessed two activities, namely, pyramid-building as well as the search for the precious metals, the fruits of which, since they could not serve the needs of man by being consumed, did not stale with abundance. The Middle Ages built cathedrals and sang dirges. Two pyramids, two masses for the dead, are twice as good as one; but not so two railways from London to York. Thus we are so sensible, have schooled ourselves to so close a semblance of prudent financiers, taking careful thought before we add to the 'financial' burdens of posterity by building them houses to live in, that we have no such easy escape from the sufferings of unemployment. We have to accept them as an inevitable result of applying to the conduct of the State the maxims which are best calculated to 'enrich' an individual by enabling him to pile up claims to enjoyment which he does not intend to exercise at any definite time.

Thehaymarketbomber said...

Your basic point about corporate interests undermining the economy are valid, but your suggestion that we stimulate the economy by employing people to produce useless plastic doo-dads is a bit silly.

This is essentially the idea that we should create full employment by having people dig holes and fill them up again as an excuse to give them a paycheck, and seems to rest on the assumption that there is no useful work to be done.

In this era of crumbling infrastructure and local governments laying off cops and teachers, it is painfully obvious that there are jobs that need doing everywhere one looks. What we don't have is a government willing to so what standard economic theory (Lord Keynes, everyone remember him?) requires and spend public money to stimulate the economy.