"Millions Will Be Left Behind in the New Economy"
By Bill Bonner
SAN MARTIN, ARGENTINA – “It feels like the world has changed so much. Just in the last six months. We’ll get home; but it won’t feel like home anymore.” Thus spake the distaff half of the household, looking ahead to November. We’ve been holed up here in the Calchaquí Valley in Argentina for the last six months. We’re now hoping to get home to Baltimore for Thanksgiving.
“I wonder what it’s going to be like. We’ve been away from civilization for so long, we’ll probably feel out-of-joint… or out of time. People will all be wearing face masks. Do they still shake hands? Do they still kiss each other on the cheek? And the election will be just over. It could be a madhouse… Or a whole new world.”
Illusion of Progress: Here at the Diary, we do not believe in “progress.” We don’t like gadgets or time wasters. We have no use for most new apps or electronic entertainment. It’s a nuisance when our computer automatically updates. Most of the electronic gear now built into autos and houses is a waste of time and money.
We look back half a century at all the “progress” that has happened. Are we better off? Are we happier? Are we better people? Is what we see more fetching? Is what we eat tastier? Is what we hear and read wiser… or more truthful? No, Dear Reader, the challenges are the same today as they were half a century ago – to separate truth from lies… beauty from ugliness… and Heaven from Hell.
Profound Change: But while “progress” is mostly an illusion, we don’t deny that things change. Underway, since at least the beginning of the 21st century, is a profound change. The U.S. economy – grown rich and powerful on fossil fuels, the internal combustion engine, and the principles of free trade, free enterprise, and free movement – is metamorphosing into something new… perhaps beautiful, perhaps hideous.
The political change is well documented. Republicans – traditionally the party of small government and balanced budgets – have become the party of Trump. Mr. Trump is opposed to free trade. Nor does he have any apparent interest in balanced budgets or any worries about debt. And he is prepared to manage the U.S. economy with varying degrees of central planning and price controls, as he feels the situation calls for.
Still, many readers – perhaps correctly – believe that the alternative would be worse. Deprived of the hypocrisy of the Republicans, we would be at the mercy of the Democrats, who have never pretended any love for balanced budgets, sound money, small government, or free enterprise. As to which would be the better captain for this Titanic, we have no opinion. Both parties are trying to prove that the other is incompetent, devilish, and imbecilic. As near as we can see, they are both right.
Sinking Ship: Whichever evil – lesser or greater – ends up in the captain’s seat, it is very likely that the great Industrial Age ship, which has been leaking badly for the last 20 years, will go down. Today, we look at what goes down with it.
Jobs, for one thing. Millions of them are being left behind… like the rusting hulk of a Japanese aircraft carrier on the bottom of the Pacific Ocean. The economy had been slowing down for half a century… staggering under the weight of debt, false signals from the Federal Reserve, financialization, and regulations. The 4% average annual growth of the 1960s fell to under 2% in the Trump years. The old economy of producing and selling things had already been hobbled and distorted. So most of the new jobs created in the 21st century were in the low-wage service sector.
K-Shaped Recovery: Then, with the coming of the COVID Lockdowns, the slowdown turned into almost a complete stop. And the jobs most affected were those in the service sector. Readers hoping for a V-shaped recovery, with a quick return to “normal,” are already searching the alphabet for alternatives. “K” is probably the best bet, with some doing better than ever, but the rest on a downward track. Which direction you go depends mostly on which economy you are in – the new one… or the one being left behind.
In the locked-down economy, some people kept working (including your editor) in the usual way. We work on the internet. We can work from anywhere we can get an internet connection – even from a remote ranch, with a satellite dish to capture a faint internet signal.
For “knowledge workers” – no matter how ignorant – the COVID lockdown posed little trouble. Lawyers, architects, accountants, analysts, bureaucrats, clerks, marketers, designers – millions of office rats were able to simply move their offices to their nests. There, with no need to commute, no gasoline to buy… no donuts and coffee to pick up on the way to work, and no lunches out… they found themselves better off. Savings rates tripled. Meanwhile, those whose work involved no internet terminal suddenly found themselves cut off from their work. And much of that work will never return.
No Way Back: Viruses will always be with us. And so will those people who use the threat of illness as a reason to control and manipulate others. Terrorists never presented much real risk to Americans. Yet, 19 years after 9/11, TSA agents still feel up old ladies and girl scouts in U.S. airports. You can’t be too safe!
Now, restaurants take diners’ temperatures before allowing them in to eat. Schools insist that students stay six feet apart – or face expulsion. Face masks are required… churches are closed… It’s not the same world. The water is already under the bridge; there’s no way to get it back.
Between the fear of getting sick (stoked by the media and the feds) and the unappealing public “health” measures to prevent it, people change their plans and their attitudes. They may even become conspicuous savers – flaunting their old cars and worn out sweaters as status symbols. Already, fewer want to take cruises… or dine out… or go to the theater.
Or go to Europe for a summer vacation. Hotel occupancy rates in Paris are down 86% from last year. They are expected to come back – but probably never to where they once were. So, what about the hotel workers? The restaurant owners? The taxi drivers? The shopkeepers?
Left Behind: But that is just the beginning. The new economy will soon have no need for long-distance truck drivers. The trucks – perhaps electric – will still be on the road. But the truck drivers will be easily replaced by electronics. And what about store clerks (who might be “vectors” for spreading disease)?
Millions of people are being left behind. What will they do? Live on welfare, like the people of West Baltimore or West Philadelphia? And what will happen to the economy itself? This new normal could cut GDP growth down to zero… and leave it there. Then what? We don’t know… But there will be other things left behind, too. Tune in tomorrow…"
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