Not With a Whimper but a Bang

 

The stock markets are crashing today. People are talking major recession. To follow Covid lockdowns, rampant inflation, and war in Europe. 

If they are right, this should be the final nail in the coffins of Kamala Harris and the Democrats in the US, and Justin Trudeau in Canada. They were set to lose anyway, but this could be historic, like RB Bennet or Herbert Hoover in their day. The left might be discredited for a generation. It may also be lucky for Farage in the UK and LePen in France that they were snookered, in part by political machinations, in the recent elections: that leaves the left holding this bag.

Meantime, in his most recent column, written before today’s news from the world’s stock markets, Xerxes the leftist columnist already comes out hard against “the system.” He quotes left-wing Anglo-Irish blogger Paul Kingsnorth: “We like to believe that we live in independent nation states run by leaders of our choosing, but this is a mirage designed to disguise the reality: The Machine is a giant, global, digitized web of commercial power and control, managed by transnational corporations and gatherings of elite powerbrokers, none of whom have very much interest in what ‘the people’ think.”

Strikingly, this is exactly what the right is saying. This is just what Trump and Farage and Poilievre have been saying. To be fair, it is not just the left that has shifted. A few years ago, the right would have resisted blaming transnational corporations. Not any more. Both left and right are now alarmed at elite powerbrokers and the trend to globalization. 

Of course, in the recent past, as soon as some leftist raises this alarm, he is declared by the left to be “far right”—see RFK, Jimmy Dore, Tulsi Gabbard, Joe Rogan. But even if this continues, if the shadowy elites sustain their control over the Democratic Party or the Liberals and NDP, the end result will be the same. The people are uniting against the powers that be.

Kingsworth and Xerxes think the problem is that things are getting more complicated due to technology, so that there is a greater distance between the elites and the common people. I think the exact opposite is happening: the new technology is levelling things, removing the need for an elite, and all its advantages. And making it easier for he people to seize control.

Life in the Bubble

The current housing market defies logic.

As I see it, the baby boomers should have been retiring for the past ten years, and downsizing. The generations that follow them are smaller. So the demand for housing should be easing.

The need to live in large cities, where the housing shortage is extreme, should also have been declining, with the increasing feasibility of telecommuting. And the attractions of convenience that might attract people to the cities have also been declining: with the Internet, you can get all the entertainment you want anywhere; with Amazon, you can purchase anything you want, and have it delivered anywhere. The cities should be emptying out.

The cost of housing is also rising much faster than incomes. This should be pushing people out of the market, at least for larger homes.

Given all these considerations, housing costs should be declining. Instead, they are skyrocketing.

It seems to me it has to mean we are in a speculative bubble. And it is, sooner or later, going to pop, with devastating results.

We even already saw it happen, in 2008.

People are buying property on speculation. When housing prices dip, as they will, a lot of folks are going to stop paying their mortgages, and a lot of money is going to disappear.

The current COVID-19 crisis has almost shut down China’s economy. It may get worse. That is sure to have consequences for the world economy. This might be the shock that starts the run on housing.

The Case for Child Labour

Europe is not climbing out of this recession easily. The German economy just tipped back into decline, Greece is on the brink of default, and the big French Bank Societe General has publically expressed its opinion that the collapse of the Euro is “inevitable.”

This fits with the thesis of our last post here, that the real problem is the demographic decline. It is worse in Europe than in America. Europe is looking more and more like Japan in 1997: while the crisis might have begun elsewhere, the underlying demographics may prevent Europe, like Japan, from ever rising from its knees.

Time for some creative thinking, surely. We cannot afford to feed any sacred cattle. Everyone is talking about ending pensioned retirement. Sure; but one other possible solution occurs to me; and perhaps a less painful one. Perhaps we have been looking at the wrong end of the spectrum. Perhaps the better option is to end the child labour laws.

This would do three useful things. First, it would expand the active labour force at a stroke, directly and more or less immediately fixing the essential immediate problem of a labour shortage. Second, it would make childbearing and childrearing more attractive: instead of representing a huge loss of income for parents, children could be self-supporting, as children are in less-developed, less urban countries; or were in Europe until the last century. This might reverse the drop in fertility, and so fix the underlying problem. Third, assuming that children would be paid lower wages, it boosts the competitiveness and so the overall economy of the developed world.

Of course, you are horrified. I know this sounds to many as heinous a suggestion as Jonathan Swift’s original “Modest Proposal.” Many are actively campaigning against child labour in the Third World.

But do we really, in this, have the children’s best interests at heart? Were child labour laws in the first place a matter of protecting children; or of boosting the price of labour? As laws were introduced to prevent child labour, and as part of the same movement, laws were also passed to prevent the employment of women. Both were thought to be humanitarian; making either work outside the home was considered exploitation. Assuming we were wrong in thinking this about women, the point logically applies to children too.

Certainly my wife, who grew up in the Third World, deeply resents the efforts of Western “do-gooders” to try to end the “exploitation of children” in the imaginary sweatshops of Asia. “What are the children supposed to do? Starve to death?” Even if literal starvation is not an issue, I think it would be rather better for the health of any child to find paying work than to be aborted.

Or if we allow them to live, being forced to sit on their butts all day in school. You might want to argue that working is not fun for children--but do they usually enjoy school? No. School is unpaid labour, and it is mandatory. Try that with anyone else, and the proper term is slavery.

Do children hate work? Not so much. Those of us who, when young, had a paper route, or every now and then ran a lemonade stand, or had some money-making hobby, I submit, remember this experience with considerable fondness. Nothing beats the feeling of holding your own earned money in your hand. You want self-esteem? That’s self-esteem.

Would we, by allowing children to work, be limiting their future? I’m sure that argument will be made. But is it correct? How much schooling these days ends up being mostly babysitting? We discover that children who are home-schooled are able to cover the same material in about half the time. It follows that children in general could just as easily cover everything they are learning now in half the time, and have half their time free for earning. Do farm kids suffer academically from having their “chores”?

Working half-time could itself be a vital part of a proper education. The world of work changes much faster than the hidebound, bureaucratic world of school. By the time a kid graduates from college, with fourteen or sixteen years of schooling behind them, but no work experience, most of what they have learned is bound to be irrelevant. Had they been working, at least some of their working knowledge would still be current. We must, in any case, replace the current model with one of lifelong learning.

Over their twelve or sixteen years of schooling, it gets hard for some students—indeed, hard for the system—to keep their focus on the relevance of it all. With concurrent work experience, one would have a constant reality check. And anyone who goes to college, as is increasingly required of almost anyone, is all dressed up with nowhere to go for another five or six or more years after that. The frustration of this, I suspect, is what drives the angst, the utter hell, of modern adolescence—which was never seen as a traumatic period in the past, or in non-Western societies. If this enforced poverty and apartheid from the real world, forbidden to do real things, is not deliberate torture, it is certainly torture nevertheless. And in the end, after all this terrible sacrifice, how many graduate from a professional school in their mid or late twenties, only to find themselves locked for life in a job they discover they hate? Better to sample styles of work on the way there.

Yes, some parents may exploit their children for money, confiscating everything a soon as they come home. But consider: are such parents likely to treat their children better simply because they are of no economic value, but instead constantly cost them money? No, logically, the case is the reverse: at least, if the child’s labour is worth money to them, they will take better care of their children’s health. Being of some worth to them is the ultimate guarantee of any child’s safety.

Earning their own money and potentially being self-supporting also allows a child a decent chance of escaping the abusive family altogether. The present system, by contrast, seems perfectly designed to promote and enable child abuse.

Yes, we probably don't want to send children down the mines. In the old days, this was a real possibility, and child labour laws accordingly made more sense. We wouldn't want young bodies doing work that is dirty and dangerous. But with the shift from an industrial to a service economy, and with modern health and safety regimes, there is in principle such work left anyway.

For poor kids, having some money to call their own may prevent many from dropping schooling sooner than they should, either because their families cannot afford to support them, or because they watch with envy others working and having money to spend. Some may find they hate the work available with relatively little schooling—so much the better. They will stick to their schooling as a result. Others may happen upon a job they really love. Perfect—let them drop out; they have the schooling they need. And if they want more later, the same half-time system remains available.

Nor will starting a family in the meantime make this option no longer possible. The kids can take care of themselves.

The Real Cause of the Recession

An economist at the Vatican has suggested that the underlying cause of the current recession is not loose credit or real estate. It is infertility. The real estate bubble of the last few years was simply masking a deeper longterm problem which is now revealed.

To call economics an inexact science is to give it far too much credit. But what Signor Gotti Tedeschi of the Institute for the Works of Religion says has, to my mind, the ring of truth. People are our most valuable resource; they produce all other resources. No nation has ever prospered as its population declined. Witness Japan: in a dead stall economically for almost two decades, due to its rapidly falling birthrate and aging population. Welcome to our future. Japan is just two decades ahead of the world curve in this regard.

Buying a home, and then possibly also a vacation or retirement home, were the two biggest, and last big, expenditures all those baby boomers were going to make. Note that the recent bubble was biggest in retirement destinations: Arizona, Florida, Nevada, the coast of Spain.

That's been done. Now the boomer demographic is barrelling into retirement. They are going to start selling their main homes and downsizing. There are fewer coming in the next few generations. It will be a buyer's market, for real estate, for the foreseeable future. And for everything else--retirees spend less. Of course, they also produce nothing.

And remember this: while all economics may be voodoo science, demographic projections are rather reliable, at last for a few decades into the future. Numbers are numbers, and it takes twenty years to make a human generation.

So the real estate market is not going to pick itself up and resume its onward march anytime soon. And that, according to the Economist and others, was just about all the action in the US and European economies for the last good number of years.Without it, we would probably have been in recession all along. Now we will also have a huge surge in government pension and health costs, coupled with a huge drop in productive capacity, and in consumer buying power, throughout the developed world.

Hard to see how an economy can go through all that without grave economic consequences.

The rising tax burden to pay for entitlements will in turn suppress economic activity; Ibn Khaldun, the great Arab historiographer, posited that all polities eventually collapse through overtaxation. We're about to test his theory; the more so since most governments have responded to the current recession by going heavily into debt.

So, okay, the entire developed world is heading for a long, perhaps permanent, Japan-like recession. What about the developing world? Certainly, the dropoff in consumer spending in the developed world will hurt them. But their own conumers; might they pick up the slack?

It doesn't look all that promising, actually. For the past four decades, most of the Third World has been busy trying to get their fertility rates down. They accordingly face more or less the same crisis. First, forget China replacing the US as the world's dominant power—it has a bigger demographic crisis facing it than anyone, about to hit in just a few years' time. Not only did they stop making children--of the children they still made, a disproportionate number were boys, meaning they will never be able to find a wife and have children of their own. It's going to be like hitting the wall, even if China's political problems do not hogtie it well before this point. Russia? In worse shape demographically than anyone else in Europe. Of the members of the big leagues, India is rather better placed than anyone, though its fertility rate too is lower than it should be and declining. Indonesia looks relatively sound. Some nations of SubSaharan Africa are growing faster than anyone--Nigeria, Ethiopia--but they have yet to demonstrate that they have the other requisites for development: stable government, decent education, lack of curruption, and so forth. Among the already-developed nations, the US is doing better than anyone at keeping fertility levels up.

Some nations, including Canada, have thought that the solution to this demographic problem was to open up the borders to increased immigration. The assimilation problems this causes are now, however, beginning to cause severe strains, and the public is turning against the idea throughout Europe. In any case, it doesn't work: it turns out that recent immigrants very quickly age themselves, and their fertility patterns quickly match those of the native-born. And, if the problem is worldwide, we are only offshoring it, not solving it.

So, how do we solve it? How can we get the engine running again, if only for our children's children, or our children's children's children? Nobody seems to know, because nobody seems to know, or professes to know, what's causing it. Nobody seems able to explain why fertility rates are dropping so quickly. Because so many women are in the workforce? Then why are Japan and Italy leading the pack? Because of growing wealth? Then why is the US somewhat resisting the trend? Because of religious beliefs? Then why is Iran flagging? Because of urbanization? Then why didn't it happen immediately postwar, when everyone poured into the suburbs? Instead, we had the baby boom.

As it happens, I have a suggestion, which seems to me to account fully for the data. The drop in fertility is proportional to the ready availability of abortion, reliable contraceptives, a social safety net, and old age pensions. Abortion and contraceptives, obviously, allow women to choose to have fewer children. Turns out, given the choice, that most do not want ten or even five. Good solid old age pensions mean less need to have children as an insurance policy against incapacity in old age. A strong social safety net from government means less need to rely on family for one's security in tough times, hence less need to have a large family.

This explains the anomaly of the USA, still at replacement level in defiance of the trend. The USA is simply less "socialized" than Europe or Japan. Communist and ex-Communist nations like Russia, Cuba, and China suffer from having a very strong social safety net, and stand out in terms of population decline.

The cure, then, might be a bitter one: roll back the social safety net. Go back to banning not only abortion, but contraceptives as well--as was the case essentially everywhere until around the 1960s. It seems just conceivable that our grandparents were right after all.

One other possibility also occurs to me. It may be just baby-boomer wishful thinking, but one hears more and more about the possibility of new life-extending medical technologies coming in the near future. A friend of mine who is in the field says something dramatic will probably be available within ten years. If so, the sudden jump in lifespans in the developed world might save us; at least long enough to make the necessary changes to our systems. Notably, this too, to be a solution, would require ending all talk of pensioned retirement at 60 or 65.

If this comes, it will only boost the current American economic dominance. The sudden jump in life expectancy would probably be felt here first, and would add to the already relatively healthy fertility rate. The US has another advantage, that is not always appreciated: while European immigration comes mostly from Muslim lands, and involves a radical change of culture, America is built for immigration, and its immigrant supply comes mostly from Latin America--on the whole, a similar culture.

I think this is enough to make it probable that China will never surpass the USA economically. If the baton passes, as it eventually must, it will take a while.

And it will more likely be to India.