Some Modest Proposals

Excerpts from the book

Confronting Complexity

X-Events, Resilience, and Human Progress

by

John L. Casti

Roger D. Jones

Michael J. Pennock

preface

table-of-contents

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I am a social-media whore. I am awake after midnight fascinated by what people might say or propose next. Now that Mr. Trump won the Presidential election, the future no longer seems to be constrained by civilized precedent. Any proposal is now taken to be credible; even the dismantling of the extremely popular Medicare is on the table.

With all these new proposals we now live in a theorist’s playground with hundreds of new scenarios to analyze. There is one proposal, in particular, that caught my attention. It was suggested by one of the more thoughtful Trump supporters on social media, if you can imagine a thoughtful Trump supporter. The proposal addresses a serious problem in the U.S., the fact that the working class did not participate in the economic recovery.

Let’s set the stage. One can think of the Great Recession as the sudden snapping of the economy after decades of pressure from increased productivity. Wait … “How can increased productivity lead to a recession”, you say. Well … increased productivity means that the same amount of goods and services can be produced with fewer people. If productivity outpaces economic growth and if companies maintain their historical structures, then companies have more and more employees on the payroll that are not directly involved in production. The Great Recession was an extreme event, an X-Event, that allowed companies to restructure, monetize their productivity, and reduce payroll. The economy recovered, but many workers did not regain their jobs. We had a jobless recovery. The working class did not participate in the economic recovery. That is the problem.

Increased productivity and the jobless recovery led to the greatest income inequality in the U.S. since the early part of the twentieth century, before the great social upheaval. How do we know that the inequality is the same as it was a hundred years ago? Sociologists measure income inequality with something called a Gini Index. Revolutions typically occur in a society if the Gini index is above 40. It is above 40 in the U.S. now as it was in the early twentieth century. The X-Event that we saw in the Presidential election is an attempt to relieve this inequality pressure with, we hope, a peaceful revolution, rather than a world conflagration.

This brings us back to the thoughtful Trump-supporter’s proposal. He feels that the problem is that American worker wages are too low because illegal immigration provides a competitive workforce willing to work for low wages. He wants to fix the problem by eliminating the competitive workforce from the country–deporting illegal aliens–and  providing  a minimum wage of something like $25 per hour for proper American workers. Then American workers can regain their pride, provide for their families, and be men again. And the women can go back to the house and be proper women again, I suppose. America will then be great again.

Let’s see what this proposal actually implies. First, it does not matter if the competitive workforce is in the U.S. or outside the U.S., it still competes with American workers, either through offshoring of American companies or by using foreign suppliers. This sets the economic value of the worker no matter where the worker is. This value is much less than $25 per hour. Therefore the difference is a subsidy to the worker–in other words, welfare. The American worker will be on welfare. He or she does not have to admit that, though. Americans gauge their value by their jobs and their pay. They can claim they are worth $25 per hour because they worked hard and earned that wage. This is a nice feature of the proposal. American men can be subsidized without their manhood being threatened. Moreover, those Americans who actually are racist will not have to live among illegal immigrants. They were all deported.

Second, where does the extra wage come from. Companies will argue that paying workers the extra amount will make the companies noncompetitive. The companies will not be able to compete in the global markets. Well, this is not entirely true. Companies can stay competitive by reducing the income of the highest income managers and shareholders. We therefore have a redistribution of wealth from high income to low income workers. This helps the inequality problem, but can you imagine Mr. Trump getting this through a Republican House and Senate? Imagine proper Republicans redistributing their wealth. That won’t happen.

One can modify the proposal some to see if we can fix some of its problems. Suppose that the minimum wage is only paid by large corporations and not by small entrepreneurial firms. Large corporations are already well subsidized through tax breaks, oil subsidies, farm subsidies, employer-based health insurance that discourages job mobility, local tax breaks for building factories, tax breaks to homeowners that discourage geographical mobility, and more. In return, large corporations can deliver votes and campaign funds. The subsidies available to large corporations actually work against entrepreneurs. If we level the playing field by requiring large corporations to pay higher wages, then entrepreneurs can employ low-wage workers. We then do not have to deport all those aliens. They can become productive members of the entrepreneurial workforce growing America’s economy. The entrepreneurs create disruptive innovation that keeps America on the cutting edge. Large corporations become less stable. Politicians get smaller campaign contributions… Smaller campaign contributions? No, never mind. That won’t work. 😉

Well, guess what. Everything is connected to everything else. One would think that increasing productivity would make goods and services easily available to all. That is not what happened…yet.  We must be careful what we wish for and be alert to unintended consequences. The world is complex and that is threatening to many people who are uncomfortable playing the scenario game we just played. The revolution can happen, but the outcome is not usually clear at the start.

Roger D. Jones; November 16, 2016; Pensacola, Florida

This blog was written after the publication of the book.

 

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