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Massive rant - Alex Belits
Massive rant
Once in a while I make entries about my thoughts that are not exactly related to the current events or things that I have recently learned, and probably are not even original enough to warrant attention, however I think, it still makes more sense to write those things down than to just forget about them. This is one of those entries.

In theory, economists exist to research the mechanisms that cause the economy to behave like it does, to make predictions based on their theories derived from that research, and propose the course of action that benefits certain participants in the economy (the whole population of Earth, certain continent, country, bank, company, a bunch of armed robbers, etc.) by playing some role in this process. Again, this is what they are supposed to do but not necessarily something that they even consider trying to do. Even a brief look at the US economy shows that it is completely artificial, overmanipulated, and unsustainable, so a sane economist can not honestly derive any theory of its short-term development while ignoring whims of the powerful players as some kind of localized and insignificant factors. For the same reason, the best advice that he can give out to a participant of such economy would be a copy of Machiavelli's "The Prince" with commentary, how it should be applied in a modern situation. What may be useful, but this is not what economists exist for.

In the long term things are much better -- all economists believe that over the time all kinds of manipulations get reversed by processes on the larger scale. The problem is, a honest economist will inevitably end up with things that amount to "if you continue like this, you are screwed in 40-50 years" or "the problems will correct themselves over the next century -- with a global war being the likely mechanism of such correction". Obviously, no one would enjoy hearing this, and no matter how good or bad their analysis is, how well did they collect his data, how much effort did they devote to filter out their political biases, those economists would share the fate of Cassandra and Laocoon, what in the modern world means being declared a lunatic, associated with the least popular at the moment political movement.

Of course, there is the third possibility -- to tell the powerful what they want to hear, and to the powerless what will make them useful to the powerful. It's not some kind of a new approach -- religious leaders used it over millennia, and it's perfectly understandable, after all if they did not do that, they would have nothing to do at all, other than re-reading their sacred texts, and arguing about quality of translations. And it's not a too far-fetched comparison, study of economy exhibits many traits of religion in general, and organized one in particular. It's really hard to lose -- if powerful will believe you, they will praise and pay you for entertainment value that you provide, and if they don't believe you, they will do exactly the same because they understand how you perpetuate their power. As for the powerless, who cares if someone can see through your rhetoric, you can always tell everyone else that they don't have your breadth of sources and depth of insight, and as long as you are not dealing with the country, chock-full of smart and educated people, you are perfectly safe.

It's possible to even play games with this -- assemble a team of "good cops" and call them, say, Keynesians, some "bad cops", calling them Chicago School, and let people choose, whom to believe. The fact that neither "cop" is going to do anything good, and that theories that they have such a heated discussion over, only can be applied to the situation that would exist 100-150 years ago, on the alternative-Earth where corruption and war were reduced by a few orders of magnitude compared to the our reality, can be safely swept under the carpet.

So if economists want to choose this comfortable and lucrative path, they have to understand their true position in society -- being the most intellectually advanced kind of propaganda workers. What amounts to an adult version of a lazy student that instead of solving the problem looks at the answer at the end of the textbook, creates a convoluted "solution" that arrives at the desired result, then presents it to the teacher, expecting a praise for original -- and correct -- thinking. Judging by the activity of the economists' little brothers, stock analysts, who over the last few decades superimposed every kind of curve known to man over the charts of their beloved funds and indexes' prices, this is not a difficult task when it comes to dealing with data. Every participant wants to report whatever fits better with a strategy that he supposedly follows even if reality is different (hi Enron, hi Worldcom, hi GDP and CPI calculations), so you can just select whoever was listening to you last time, and did not yet exceed the limits of creative accounting. And if no one did, it's extremely easy to find a piece with highest noise to signal ratio, then select a subset that demonstrates how some particular idea works in reality. After all, it's not a real science where an experiment should be possible to reproduce, and theories are supposed to work on everything.

In US merely being able to spout bullshit with serious look on your face while wearing an expensive suit is half of the success already. However the other half requires a mastery of linguistic contortions. Even theories that were developed by honest economists operate in some simplified alternative realities where the impossible is assumed -- say, that people never co-operate, that every transaction happens when it benefits both participants more than the absence of it, that people are always rational and informed, etc. So many of the terms and ideas used in those theories are far enough from reality already, yet economists can easily use them while describing a drastically different reality. But why limit ourself to those things? Invent new words and definitions, stuff them with ideologically-charged meaning. Your colleagues from political propaganda will help to make sure that the words will be known in the necessary context, just don't forget to describe the context at the level that those propaganda workers can understand.

So when faced with a difficult task, such as making public swallow "outsourcing" and the idea that many people are going to be kicked out of their jobs, and dropped down a few levels on the social ladder, you have to invent something that sounds positive and larger than their little, pitiful lives. Like, GLOBALIZATION. See how I will take a disaster and turn it into the promise of countless riches. Please ignore my sarcasm, it can be easily filtered out:

It's no longer an exploitation of the last gasps of post-WWII single-currency dominance in the international trade, it's not a massive wave of creative accounting when it comes to role of imports in GDP, it's not a massive mess in the economies of third-world countries that would be better if they industrialized on their own, and trade deficit can be easily converted into national debt, and then further into FR loans, that are, as we know, bottomless. It's an inevitable historically predetermined phenomenon, that is at the same time a great gift of US big businesses to the mankind. And don't despair, citizens of this great nation. Giant and unmeasurable amounts of goods and money are heading your way, just because we are already rich. You are not rich? That's ok, there will be enough for everyone! You said, you are waitress at Denny's? Great! We will become so rich, Denny's will become the finest restaurant in the world, and rich customers will tip you 250% of the order, out of gratitude for building such a great country for them. I would say "trickle down", but my teacher told me that it's no longer an accepted term, and you probably hate it from the Reagan time, but I would rather tell you how great Reagan was, so it won't matter.

You are white, right? Just think of those foreigners as your slaves, white people are supposed to have slaves in this GLOBAL farm. Everyone loves slavery, and the best thing is, as long as you are white, you can never become a slave, so look at all those brown and yellow worker bees in this GLOBALIZED world, and imagine, how many of them serve you. Let me get a pen and paper, I can calculate precisely, how many slaves do you have, taking into account world population, the percentages of GDPs of other countries that flow directly into US import, and US population that you are a 1/300000000th part of. See how many people serve you? This is because you are in this God-chosen country that brings GLOBALIZATION on the rest of the world, be proud of it! Before the world wasn't a globe, it was flat like a pancake, resting on three elephants. And mighty US, by the power of Federal Reserve loans, blessed by being too far from Europe to be bombed to smithereens in WWII, united the nations of the world, bent its surface, and became the first and the only non-evil GLOBAL empire, and this is why you are going to benefit from this.

WTF am I talking about? Am I ranting? Oh, it doesn't matter, and your pitiful salary does not matter either, because it's certainly not typical. We have just completed JOBLESS RECOVERY, and entering the stage of GROWTH. Who asked, what parts of the economy grow? All of them do! Just some of them grow abroad, and we own those factories, their natural resources, and, as I have demonstrated before by my irrefutable logic, we own those people, too, so if you see them grow, it's not them, it's really our economy grows! What, you want to know, what grows inside the country? It's TECHNOLOGY and SERVICE INDUSTRY! What do you mean, TECHNOLOGY moved all production abroad? We have INTELLECTUAL PROPERTY that is created by foreigners in US, and we license it back to companies in their home countries, and they send us back products -- all for nothing. Because we can force our OWNERSHIP OF INTELLECTUAL PROPERTY on their countries, and they can't! And their engineers will always work for us because our glorious Federal Reserve can issue dollars, and whatever pitiful bank they have, can't! Umm what? Who cares that their central banks are bursting from US bonds, this is all politics, our clue^H^H^H^Hfearless leader knows what he is doing. It's important that we are a part of this great GLOBALIZATION process, and we will be forever the slaveowners of this world. Because it's GLOBAL. And because I have this suit, and because I am telling you that we all will be rich and powerful, you should know that I am right.

Now, how about a different word to describe this shit? Like, "Deindustrialization"? Yes, destruction of industry and Industrial Revolution backward. Yes, this word was already used by those hack economists that argued that it's a good thing, however it certainly is closer to reality and properly describes a truly frightening process -- one of losing capability for industrial production within the country. And don't give me all this "GLOBAL" crap. Nation is defined as commonality of people based on territory, culture and (drumroll) trade. If things were really this rosy, we would live in the USian Province of the Indo-Chinese-Northamerican Union, and you would be able to talk in Cantonese, or whatever language your friendly neighbor uses at work. And if this is not really the case, then something is fishy, and I think, I know what exactly. We don't have GLOBALIZATION as in merging national economies together -- if this actually happened, transportation costs and prevention of high density of pollution would dictate that industry will be distributed among the inhabited areas, with density increasing toward population centers, natural resources, established industrial and transportation centers, etc. Instead, industry seeks "cheap labor", as if third world inhabitants are all suffering from some genetic mental disease that causes them to work for lower wages. What can only happen if this happy GLOBAL economy does not exist. Again, even a brief glance on the situation reveals the reason -- to have a truly common economy, movement of money/investment, products and people/labor should be free over the whole terriory involved. And if that happened, it would mean that US citizen would be able to mail-order products from China, and Chinese would be able to move to US if the difference in "employment opportunities" happened to outweigh the relocation costs.

Obviously, neither of those things is going to happen any soon, and if they did, the economies of both US and China would collapse. So telling Americans that no, their industry did not die, it just went far, far away, is an exercise in bullshit. What is happening, is deindustrialization, a destruction of industry and erosion of everything that serves as a foundation for the industry. Including the often-mentioned high technology. This is something that I should explain better.

In 18th century if some primitive wool factory had to increase its production volume, it could bring more people, train them to use some simple mostly muscle-driven machinery, and provide them food, housing, clothes, etc., either directly or through paying high enough salary to buy those things. Salaries were low, so any attempt to save on that would quickly translate into diseased and dead workers, what would be very counterproductive. Expand a factory, raw output and profits will increase, productivity and profit margin stay the same. Sucks. Then someone proposed to use a steam engine and more advanced machines. Factory is still larger, the number of people is the same or less, output is much higher, quality is improved, therefore productivity is higher, salary stays the same or close, so profit margin is higher. Better. At some point a punchcard-driven Jacquard loom is invented (18-th century IT upgrade!). Wider product range, higher prices, all from a relatively small investment. Even better. Over the time the increased production combined with competition between factories drops prices and increases salaries, so the effect on the profits is not as much as if the factory had a monopoly on both fabrics and providing employment, however unless there is an opportunity to secure this monopoly, it's better to improve with the advancement of technology and have stable or slowly growing profit margin than feed a huge crowd of manual-loom-using people, and lose for sure.

It becomes quite apparent that in EVERY branch of industry an investment into new technologies gives more return than into simple expansion, as long as the factory is expected to operate over a long enough time. Even monopolization does not change that -- it merely allows the monopolist to survive while using an inferior strategy, and decreases the incentive to improve. Therefore everyone except lazy monopolists adopt better and better technology, thus developing the industry as a whole. Now imagine a different scenario. Just when the factory owner was ready to sign the purchase order for the first steam-powered loom, a gnome appears in front of him. And tells the factory owner that for some reason that only a gnome would understand, he and millions of other gnomes are going to work on the old manual looms, and in exchange for that work they want the rights to hold a gnome music festival every year on the factory roof. Because gnomes live in some closed ecosystem and have everything that they need for life, however they don't have a roof to hold a music festival on, and all other humans don't provide their roofs out of some kind of superstition against gnomes singing on their roofs. I think, it's obvious what would happen next. Getting a nearly unlimited labor pool compared to the original one, and being able to reduce the salaries to the cost of yearly roof sweeping, factory owner dumps all profits into expanding the factory, and despite the fact that the gnome's productivity does not grow, and profit margin stays the same, factory owner's profits grow faster than if he bought those newfangled steam engines. Gnome-powered factory grows at the unprecedented rate, defeats all competitors who don't have access to gnomes, merges with ones that gnomes like, and becomes a monopolist. Steam engine, even combined with gnomes does not provide any benefit in profits compared to just more gnomes with their "flat roof rate", so it's unused.

If someone invented an electric loom, with computerized control, more or less automated repair, and added a CNC sewing machine, capable of making pants, it would be a factory far superior to the gnome operation described above. Including profits. However since gnomes do all the work, and no one buys steam-powered looms, engineers no longer work on a better loom. Centuries pass, and electric motor isn't invented yet.

Then someone -- maybe a human, maybe a gnome, invents an electric bulb and a generator. Gnomes decide that they can have their music festivals in a huge cave lit by electric bulbs, and don't need roofs. And that they don't really like those old looms. Gnomes have their first music festival in a cave, like the acoustics of the cave more than the wool factory roof, and leave. Wool factory owner has an enormous one-story building with well-swept roof, full of old machinery with gnome-sized handles and knobs, with manuals written in Gnomish, located between a few villages, where peasants did not study wool making in centuries, are accustomed to easily accessible wool, and on the top of that, hate his guts for overcharging. Manual machines can not be adapted for steam or electric power, the only kind of a steam machine that is built is a turbine for electric generator, and no one knows how to make it work with a loom. Electric motor can be developed, however the time and expense for building a complete electric loom plus installing it in the old factory is beyond the resources of now-poor factory owner.

Development of a loom has to start from the point that is earlier than when the gnomes arrived.

This is what I mean by deindustrialization. When it is cheaper to expand production without improvement in technology and merely using more "cheap" labor, the opportunity for much greater improvement is lost, and dependency is created on "cheap" labor remaining cheap. Development of technology goes backward. But, you would say, this is not true! Technology does improve, computers are getting faster, phones are getting smaller, cars are getting prettier, and missiles are getting deadlier every week! Of course, they do. The problem is, progress continues only in the areas where there is no benefit in adding more labor. Computers would not be nearly as fast if not for entertainment-related uses, in fact every direction of the computer science and engineering development that provides no direct benefit for entertainment, is stalled for at least 15 years already.

Machine vision? What's that? It can tell a cube from a cylinder, same as 15 years ago! What do you mean, we thought, it will drive cars by now? And what is that crazy talk about completely automated sewing machine? We didn't even bother with theory, once it became clear that those applications won't be needed any soon!

Oh, and you wanted some universal protocol for handling structured information? You think, XML sucks? You don't understand! The primary purpose of every data format is presenting it to a human in a pretty form! We want fonts! We want colors! We want positions! We don't want semantics, rules, serialization and universal transactions support with arbitrary topology of data propagation, this is hard and not pretty! Be thankful that we have stuffed all the pretty stuff into stylesheets, and blessed you with UTF-8. See, XML parser is complex enough already, you don't want to add something that will make it useful for data manipulation, consistency and transactions support! Thinking is for old people, I want to learn Photoshop and Flash, and be a graphics designer!

And more or less the same shit in all other areas where progress did not stop yet.

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3 comments or Leave a comment
From: nickhalfasleep Date: March 17th, 2005 03:40 pm (UTC) (Link)

shit flows downhill.

I agree with you in your analysis of the situation, and the ultimate effect, but I don't think that it's entirely a bad thing.

In many ways, we are seeing the gradual improvement of two major countries on the planet, India and China. Why these two and not others? I think they are both investing heavily in core education and have populations that beleive in the value of an education. They are getting steel mills, chip fabs, programming centers, space programs. Many other third world countries that are "benefitting" from "globalization" are stuck with a workforce that has limited education, in a society where their children cannot better themselves with schooling. This is why areas under NAFTA aren't improving along the border. We now have two generations of manufacturing workers.

It's not a question of if the oil runs out.. it's a matter of when. Economies will have to function very differently when there is no longer a cheap fuel source for production and distribution. The cost of manufacturing, computing, and transportation goes way up. And most important, food will get much more expensive as the current high energy crop production (pumping the soil full of fertilizer, herbicides and insecticides) becomes much more expensive.
abelits From: abelits Date: March 17th, 2005 07:24 pm (UTC) (Link)

Re: shit flows downhill.

India and China deserve a separate analysis -- I think, the current situation in their economy allows them to benefit from export because export-oriented economy is immune to overproduction, and their growth rate would inevitably cause massive overproduction and crisis otherwise. With a giant export "sink", growth of industry can be artificially balanced in the long term, without suffering from imbalance that happens in the short term.

But this is something that can't last, export-oriented growth just for growth sake provides little benefit for anything within the country until someone says "enough", local currency is allowed to float, population becomes able to buy products that formerly were produced for export, by their already-balanced industry. At least this is what I think, China is doing -- their government seems to know how to combine the idea of capitalism and government-originated manipulation of industry and market.

If so, US and other "developed" countries are getting a temporary (even if decades-long) windfall from a process that will probably benefit China in the future, and certainly hurts US economy right now.

Smaller countries that only have specialized export-oriented industries, and without powerful forces, such as Chinese government, that can manipulate the process of their development, do not benefit at all -- definitely far behind China or India, what in competitive international market is just as bad as not improving at all. They have colonial economies, and by "colonial" I don't even mean British Empire-style colonial, British at least had to use gold in their trade with colonies. I mean outright slavery at the macroeconomic level -- country never gets resources necessary for any kind of improvement, it merely provides labor in exchange for keeping people from dying.
abelits From: abelits Date: March 17th, 2005 09:24 pm (UTC) (Link)

Re: shit flows downhill.

And again, a separate note about oil.

It's true that industrialization caused energy consumption to increase, and that now it means increasing consumption of oil. Unfortunately the reverse process will not get oil consumption down -- that would require getting the population down closer to to pre-industrialization numbers, and significantly dropping their quality of life.

A laptop computer that I carry for I think, four years, has power consumption below 45W (what would happen if it ran on the maximum rated current -- the real power consumption is closer to 25W). The ceiling light in my office is at least 300W. Two computers that I have running in my rack, take about 600W when I run a load test on them simultaneously. A mill in the metal shop, where parts for those computers are produced, takes 3750W at the peak load that never happens. 2250W goes to the air compressor motor, that I have seen used in at most a 1% cycle -- ok, it is supposed to be 10% when the real production will start. All those things are powered by electric current, that can be produced in shitloads of ways, including nuclear power, on large, highly efficient generators.

My car's engine is 100kW, can only run on oil-based products, and uses a small piston-based internal combustion engine, a design that is notoriously inefficient, yet the size and power necessary for a car, and cost of production that will put it into an acceptable price range, leave only this, and similar options. And this car 99.9% of the time "transports" my 120-pound body and 10-20 pounds of equipment, groceries, etc. It runs in a 10% cycle, yet still uses twice the energy of the rest of the equipment mentioned. If I was not an engineer but, say, an office worker, the proportion of my car in the energy consumption would be much higher.

Imagine that the oil prices went through the roof. US can't redesign its cities and eliminate sprawl, so as long as the population does not disappear, and everyone does not switch to telecommuting, something still has to provide transportation to all those people. If they all scrapped mills and compressors, and half of their computers in the process of deindustrialization, it would be a drop in the bucket -- energy consumption would not only stay high, a higher percentage of it will be inflexible, tied to oil and oil alone.
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