Economists like to say that the economy is suffering through “structural change”, meaning that the fundamentals that supported the economy we used to know and understand are gone. Housing, construction, and consumerism – and all the other drivers of our economy in the past -- will not the drivers of the economy in the future.
The economy has to be rebuilt from the ground up, but the ideas being floated for creating jobs aren’t applicable to building a 21st century economy. The Obama Administration made a lot noise about creating jobs by repairing infrastructure – fixing bridges, highways and the rail system. But why? How can 20th century infrastructure serve a 21st century economy? The economy that infrastructure was built to serve no longer exist.
Industries like construction, housing, real estate and the mortgage banking industry are gone, at least in the scope we knew them. We have learned our lesson and will never again depend on mortgage financing to support the economy. That train left the station and turned into the wreck we now call the Great Recession. Manufacturing jobs have been gone for some time, and they are not coming back, either. And even if they did come back they would not create many jobs because all those assembly and fabrication jobs have been replaced by robots and computers.
There are other industries that will be leaving soon. The days of the internal combustion engine are numbered and auto manufacturers know it. Fossil fuels are getting more expensive, and the automobiles, planes and trains that use them are becoming more expensive as well. The automobile industry is slowly transitioning to electric cars, but faces challenges in storing power and efficiently converting electricity into wheels pushing against pavement. How all that power gets generated is also an open question – coal, gas, nuclear or something yet to be invented.
Books, magazines and newspapers are on the way out, too. Newspapers have been closing their doors for some time and bookstores, (most spectacularly Borders), are close behind. EBooks and their expensive readers are making huge dents in the book industry. Oh, and did anyone notice that Eastman Kodak produced its last run of cellophane film recently? Its stock price is about the same as what it was in 1950, and the future is so bleak that the company is more valuable for its assets than future profits (Yeats 11 August, 2011). Cameras are now digital, and they are on every phone and laptop computer. Video conferencing is poised to replace telephone calls. Already public gathering places and traffic intersections are under the gaze of digital cameras, and most of those cameras are connected wirelessly or otherwise to a computer hard drive.
Broadcast TV quietly died a while back, and entertainment shifted to delivery by cable. Another shift is now happening – people are dropping their expensive cable contracts in favor of cheaper high speed DSL and satellite (Washington Post 12 August 2011). Look for cable companies to either reinvent themselves into something new or crease to exist.
Building bullet trains and laying down more asphalt makes no sense when companies like Health Net are moving towards “officeless workers” and ecommerce providers like GoDaddy.com are on a hiring spree. Meanwhile Microsoft buys Skype for eight billion dollars and Google buys Motorola for twelve billion because they see that mobile communications will explode in the next few years.
The future is in new technologies, not old ones. Who can build the infrastructure that can support a future based on computerized video communications and distributed network organizations? Probably not construction workers. We need educated professionals of all sorts to create that kind of future, but where are they?
One of the big secrets of the Great Recession is that a huge number of well educated highly skilled knowledge workers are without jobs. Contrary to what the education industry would have us believe more education does not lead to better employment outcomes. The portion of college grads who are not participating in the workforce has been increasing for some time and in July 2011 stands at about 25% (BLS 2011). That translates to about ten million educated people who are not working. (Click here to download an Excel file containing BLS data showing the details.)
That’s not all. According to an analysis of BLS data by education critic Richard Vedder (2010 October 20) about 17 million college grads lucky enough to be employed do not have jobs requiring a degree. Their expensive education resulted in jobs as waitpersons, bartenders and retail clerks. That does not surprise those of us who actually talk to our service people. The technician who connected my phone and internet service had two masters’ degrees, the guy running the crew who fixed my roof earned an MPA from Wake Forrest, and the last time I ate at Red Robin our waiter had degrees in both education and Spanish.
It seems obvious that the path out of the recession will depend on new technological developments, and if Vetter and I have our numbers right, there at least 37 million educated people standing around doing little or nothing to get us there. Like a powerful engine in a race car burning gas while it idles in the driveway the talent and potential of these people is going to waste. We cannot afford for them to live out their most productive years waiting tables and ringing up sales. Yet talking heads, presidential candidates and policy makers in Washington do not seem to understand this, and appear to believe the way to build the economy of the future is to resurrect the one from the past.
BLS (2011) Bureau of Labor Statistics, Databases, Tables & Calculators by Subject. Labor Force Statistics including the National Unemployment Rate. Available at: http://data.bls.gov/pdq/querytool.jsp?survey=ln.
Vedder, R. (2010 October 20). Why Did 17 Million Students Go to College? Chronicle of Higher Education. Available at: http://chronicle.com/blogs/innovations/why-did-17-million-students-go-to-college/27634
Washington Post. (2011 August 12). Pay TV industry loses record number of subscribers. Washington Post. Available at: http://www.washingtonpost.com/lifestyle/style/pay-tv-industry-loses-record-number-of-subscribers/2011/08/10/gIQAwzKbBJ_story.html
Yeats, J. (2011 August 11,). Asset Value Makes Eastman Kodak Attractive. Small Cap Network. Jonathan Yeats Space. Available at: http://www.smallcapnetwork.com/Jonathan-Yates/s/via/3420/