Mark Blythe, the Irish guy who predicted Brexit & Trump

[Milton Kuo]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

People don't like to buy their meals from robots, but a lot of the automation is now in the kitchen which is hidden from public view while the restaurants are fronted by real people taking your orders and filling up your soft drink cups.

I suspect that using robots to eliminate the people manning the cashiers at McDonald's is something that would not turn customers away, assuming that the robots were actually good. (Self check-out lanes at most stores in the U.S. are terrible because the failsafes to prevent theft trigger quite often, which then require an employee to intervene.)

It's also not clear to me that fully automating a McDonald's would result in unhygienic poverty, if that was dcarrigg's meaning. Assuming the robots worked and that's just not feasible yet, I would think a McDonald's would be more hygienic because you wouldn't have people slacking off on their jobs. One of the big reasons for the rise in e. coli outbreaks from consuming salad vegetables over the past decades is directly related to the use of humans instead of robots to pick crops.

There're some jobs where robots from replace humans, the oldest and the second oldest profession in the world.

That's one use of robots that one would think ought to be more hygienic.

[jk]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

ed yardeni:
If we were all populists now, I would challenge the argument made by Globalists that Americans have lost jobs as a result of labor-saving technological innovations, rather than the migration of jobs to Chinese workers. I would counter that this notion isn’t supported by the flat trends in manufacturing production and capacity since 2001. Technological innovation should expand manufacturing capacity and boost labor productivity. Yet nonfarm business productivity growth has been extremely weak during the current economic expansion. Over the past 20 quarters (five years), it is up only 0.7% per year on average. It has never been this weak during an economic expansion!

[otoh]..In any event, the horses may already be out of the barn. Only 8.5% of payroll employment is now attributable to manufacturing, down from 10.3% 10 years ago, 14.3% 20 years ago, and 17.5% 30 years ago. Bringing factory jobs back to the US may bring them back to automated factories loaded with robots. Even Chinese factories are using more robots.

The standard of living hasn’t stagnated in the US. That notion has been promoted by the President-elect, and other populists, who have observed that real median household income has been virtually flat since 1999, though it did jump 5.2% during 2015. Previously on several occasions, I questioned the accuracy of this data series, which is based on survey (micro) data, is limited to money income, is pre-tax, and is pre-noncash entitlements. Macro data based on tax returns and other fact-based sources, on real personal income, disposable personal income, and consumption per household all remain on rising trends and are at record highs. While my data are averages (means) rather than medians, I doubt that there are enough rich people to seriously distort my numbers, especially for real mean consumer spending per household.

[dcarrigg]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

I suspect that using robots to eliminate the people manning the cashiers at McDonald's is something that would not turn customers away, assuming that the robots were actually good.

It's also not clear to me that fully automating a McDonald's would result in unhygienic poverty, if that was dcarrigg's meaning. Assuming the robots worked and that's just not feasible yet, I would think a McDonald's would be more hygienic because you wouldn't have people slacking off on their jobs.

I suppose I look at things differently. I don't frequent fast food establishments. But last time I happened to be in one was maybe 4 months ago--it happened to be a Wendy's not a McDonalds. Long story short, for minimum wage, they had a counter staff that was flawlessly interacting with a long customer line that spoke English, Spanish, Portuguese, or Khmer. I saw people taking out trash (perhaps a dozen bags in a large wheel-bin) and cleaning bathrooms (mopping) and clearing tables and soda areas and staging areas of trash. I saw people unboxing cups and straws and wrappers and napkins. I saw a lady wearing the drive-thru headset run back to the cooler to re-stock water bottles. They were moving customers through at about a rate of 90 seconds per order and had a line out the door, probably 20 orders deep, along with a long drive-thru line (it was lunch time). All pretty orderly. All for an incredibly cheap price of maybe $10 per hour with all their FICA and UI and all the back-end employer charges added in. They had maybe 12 of them on. That's $120 on the hour. They were doing about $20 every 90 seconds in revenue just at the counter--an easy $800 per hour, probably that again in the drivethru. They average a 13.4% margin. That leaves about $200 profit on the hour during the hour of the day when you have the most staff on. Not half bad.

Now, get even a good machine there, and it will be tough. Granny will press the wrong button. Suon might set the thing to Khmer and you might have trouble getting the UI back to a language you can follow. Really, even if it works pretty damned smoothly, just navigating the buttons slower because you're less familiar with them than people who do it full time is going to add time onto that 90 seconds. Even if it goes to 120 seconds, that sends the line uncomfortably far out the door or around the building, and people drive by instead of stopping in.

But more than that, forget the future, just think about what they do now. The margin is so high on sodas and sugar drinks, they make customers pour them themselves. It's cheaper to let them have free refills and go hog wild than it is to have employees take the time to fill the cup for them. You got to keep that line moving and the interaction->pay->receive food time down as close to 0 as possible. So now, customers are getting their own trays, getting their own napkins, filling their own drinks, so on and so forth. Not exactly the stuff of sanitary dreams or romantic dinners...

I find the same thing to be largely true of the "automated check out" lines at the supermarket. There's nothing automated about them. They are just forcing you as the customer to ring in and bag your own groceries for no pay instead of offering that service to you. That's it. It's just worse quality service. Even if the thing worked great, it's still a bigger pain in the ass to sort through 12 menu screens of apples to find the stupid one I happened to pick up than to let the checkout girl punch in the PLU in 2 seconds and be done with it. Last time I just picked one at random to get it over with and either over or under paid. What are they going to do, jail me?

But the thing is, these systems only are in place at the bottom end of the retail and restaurant chains. They get put in stores that serve the lowest classes, where people expect the worst quality service, or none at all. It's more of a cruel punishment than anything--forcing minimum wage workers out of work so that they can do that same work for free when they go to minimum wage restaurants like McDonalds or stores like Wal*Mart. Now, instead of paying one lower class worker $7.25 per hour to run a cash register and another $7.25 per hour to bag groceries, they can make every one of their lower class customers ring and bag those groceries themselves for $0 per hour. Distributed labor. Sharing economy!

But the thing is, people just a rung up on the economic ladder are not going to stand for it. They are not going to order their meals out of a vending machine. They are going to want a building with bathrooms that are reasonably nice and waiters to serve them and present food and make recommendations. They are going to want a full-service grocer, probably even one that will have employees help the wife out to the car, rather than to to waste 20 minutes fighting a robot followed by another 10 bagging groceries just for the privilege of paying for your food. They are not going to tolerate filthy tables and trash strewn everywhere around a vending machine.

So, basically, to the extent it ever happens, it will occur for the express and sole purpose of punishing the lower classes and making their lives less dignified and less humane and more different than before.

One of the big reasons for the rise in e. coli outbreaks from consuming salad vegetables over the past decades is directly related to the use of humans instead of robots to pick crops.

I think you're seeing more of a move in the other direction in many ways, with all this organic/locovore stuff. I mean, much of crop harvesting is automated now, but a lot of it still cannot be. Since minimum wage doesn't apply to farm work, though, you can pay imported labor pennies to do it, which is mostly what happens. Robots will probably never be cheaper than migrant farmworkers. They can't be cheaper than sharecroppers. And certainly, they can never compete with slaves. So there are lots of options for appeasing Mammon of Market that don't break the robots' way, even if the only values we care about are property rights and the bottom line.

[dcarrigg]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

ed yardeni:
If we were all populists now, I would challenge the argument made by Globalists that Americans have lost jobs as a result of labor-saving technological innovations, rather than the migration of jobs to Chinese workers. I would counter that this notion isn’t supported by the flat trends in manufacturing production and capacity since 2001. Technological innovation should expand manufacturing capacity and boost labor productivity. Yet nonfarm business productivity growth has been extremely weak during the current economic expansion. Over the past 20 quarters (five years), it is up only 0.7% per year on average. It has never been this weak during an economic expansion!

[otoh]..In any event, the horses may already be out of the barn. Only 8.5% of payroll employment is now attributable to manufacturing, down from 10.3% 10 years ago, 14.3% 20 years ago, and 17.5% 30 years ago. Bringing factory jobs back to the US may bring them back to automated factories loaded with robots. Even Chinese factories are using more robots.

The standard of living hasn’t stagnated in the US. That notion has been promoted by the President-elect, and other populists, who have observed that real median household income has been virtually flat since 1999, though it did jump 5.2% during 2015. Previously on several occasions, I questioned the accuracy of this data series, which is based on survey (micro) data, is limited to money income, is pre-tax, and is pre-noncash entitlements. Macro data based on tax returns and other fact-based sources, on real personal income, disposable personal income, and consumption per household all remain on rising trends and are at record highs. While my data are averages (means) rather than medians, I doubt that there are enough rich people to seriously distort my numbers, especially for real mean consumer spending per household.

It strikes me as nonsense this theory that people and families are actually doing great economically, but they're just too stupid or brainwashed to realize it. I simply don't buy it for a second, and I think neither should anyone else.

There are a million other figures one could point to--declining labor participation, declining home ownership rates, skyrocketing rent, healthcare, and tuition costs, the near total elimination of pensions and the fact that the average 401(k) at retirement is only sufficient to cover less than a 3 year retirement...I mean, you could go on and on and find 100 reasons things suck more today than in 1997. But forget the figures for a moment.

This nonsense reminds me of how economists go around and contort deflators and figures and add in health costs on the other side of the ledger to try to prove that--even if wages didn't go up--"total compensation" did.

But you know the truth? Nobody cares. Regular people don't give a shit about that.

If people feel like the economy's good, they'll know it, and they'll let you know, like in the late 1990s.

The reason people are telling you they feel like it is bad is because their financial positions are precarious and they feel like their disposable income is going down, at least on a purchasing power basis. And who would know better than the people living it?

Economists and pundits need to get their heads out of their asses, and stop assuming that when the masses disagree with them the reason is simply ignorance in the masses.

They need to consider the possibility that they are figuring something wrong and that millions of unhappy people don't like the deal they're getting, regardless of how good economists think it looks on a FRED graph.

The reality of the current scenario is really quite simple, and it has everything to do with how he slipped in the phrase, 'non-cash entitlements.'

Here's how it works in the US:

1. Total Compensation is up, but that's almost entirely healthcare costs.


2. Incomes are up, but household size has shrunk and housing costs have drastically increased.


3. Which is all a fancy-man's way of saying, "There ain't much pocket money to go around these days."

[Milton Kuo]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

It strikes me as nonsense this theory that people and families are actually doing great economically, but they're just too stupid or brainwashed to realize it. I simply don't buy it for a second, and I think neither should anyone else.

Yardeni does do some good work but this article is utter rot. I just looked up the IRS data for median wage in 1999 and it is between $25,000 and $30,000. For 2015, median wage was approximately $30,000. These, of course, are nominal wages and not real wages. So Yardeni's assertion that "the standard of living hasn't stagnated in the U.S." is absolutely correct. Stagnation means standing still; the standard of living in the U.S. is getting moving downward.

If we were to believe the rates of inflation put forth by the various economists at the Federal Reserve, BEA, and other ivory towers, at a 2.5% rate of inflation (Hah!), 2015's $30,000 is only $20,000 in 1999! If we are more generous and assume that inflation was only 2.0% (Double hah!), $30,000 in 2015 is only worth $21,700 in 1999 dollars!

How about if we assume a 4% rate of inflation, which I think is still too low? $30,000 in 2015 is worth only $15,600 in 1999 dollars.

Egads. The data is right there at the IRS. This is either seriously sloppy work or propaganda.

[Chris Coles]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

Egads. The data is right there at the IRS. This is either seriously sloppy work or propaganda.

Most economists, particularly those in academia, totally rely upon the government for their income via grants, so it is little wonder that they will sing the government's tune.

[Thailandnotes]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

"Of all the clouds and shadows that hung over Clinton in the press, the darkest, perhaps, was the prospect of boredom. Among voters, a kind of nihilistic glee may have been as much a factor in Trump’s election as economic dissatisfaction or racial resentment."

http://www.newyorker.com/culture/cul...ump-was-coming

[GRG55]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

...This nonsense reminds me of how economists go around and contort deflators and figures and add in health costs on the other side of the ledger to try to prove that--even if wages didn't go up--"total compensation" did.

But you know the truth? Nobody cares. Regular people don't give a shit about that.

If people feel like the economy's good, they'll know it, and they'll let you know, like in the late 1990s.

The reason people are telling you they feel like it is bad is because their financial positions are precarious and they feel like their disposable income is going down, at least on a purchasing power basis. And who would know better than the people living it?

Economists and pundits need to get their heads out of their asses, and stop assuming that when the masses disagree with them the reason is simply ignorance in the masses.

They need to consider the possibility that they are figuring something wrong and that millions of unhappy people don't like the deal they're getting, regardless of how good economists think it looks on a FRED graph.

...

I don't think it was any coincidence that the major inflationary impulse of the 1970s overlapped with one of the greatest non-wartime increases in female labour force participation. A perfectly logical response to declining real incomes...send the wife out to work. And the former stigma of doing that was washed off by expanding the definition of what it meant to be a feminist, the establishment of the daycare industry (to solve that inconvenient problem) and a host of government incentives and legislative supports because, of course, more workers means more tax revenue.

Before someone dumps on this as an unenlightened dinosaur trying to move us all back to Father Knows Best or the Leave it To Beaver 1950s, I am of generally liberal persuasion in that everybody should be able to have and make these choices for themselves, regardless of whether they are male or female. Where it breaks down is when one is under the delusion that such choices are a right that comes without consequences - on marriages, families and especially children (my wife has a heretical theory that perhaps the seemingly extraordinary emotional fragility of so many students on campuses these days might have some connection with all this). But I digress, and this be a topic for some other thread.

Having already exhausted the choice of putting the spouse into the workplace to make ends meet some 4 decades ago, and having watched real incomes and real purchasing power steadily erode through the allegedly "deflationary" period since the Volcker induced early '80s recessions, the next logical response was for households to leverage up in the secular declining interest rate environment to maintain their standard of living. And with the aid of ever more creative credit products that worked real well. Until it didn't, which event was marked by the 08/09 financial calamity. And there seems no more rabbits to be pulled from that hat since.

I agree with you dcarrigg. Call it whatever - the 1%, the "elites", the "protected" vs the "unprotected" (terminology I first read in one of John Mauldin's musings iirc), or anything else. The rapidly growing stratification might as well be a 21st Century version of the society portrayed in Downton Abbey; the fascination with the lavish homes of Hollywood stars and the Hampton residences of the Earls of Wall Street seem eerily similar. The lecturing from this cohort about the "uneducated" and the "uninformed", and we know which candidate their money went to, echos the ancient theme that the lower classes should understand and accept their place. The problem is today's "Downton servant class" is not content, unlike many of their television counterparts. Imagine that.

What next? Remove the right to vote, except for the chosen few? Seems some of the anti-referendum sentiment being openly expressed now, especially in Europe and in Canada, is the leading edge of exactly that.

[thriftyandboringinohio]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

Thanks GRG55.

I love any chance to chime in with my sing-song slogan:
"What do we want?" - "WAGE INFLATION" - "When do we want it?" - "NOW!"
But it supports your point.

Over at Quartz is a good article focused on trade policy that supports this point.
It focuses on failures of Ricardo's theories of competitive advantage, but returns time and again to wages and standards of living.

http://qz.com/840973/everything-we-t...rade-is-wrong/

...Why would the government do this? The Keynes-based policies of the postwar era were designed with the understanding that workers were also consumers—a fundamental engine of demand. Making sure they had enough money in their pockets to buy goods kept the economy chugging along. (This is a different approach to growth from Ricardo’s model, which focuses on boosting the supply of goods and services, with little thought about who will buy them.)...

As wage earners share of GPD has fallen over the last 30 or 40 years, we are increasingly forced to answer that basic question:

Who is going to buy all this stuff?
How can business thrive if the vast majority of potential customers are impoverished?

[dcarrigg]

Re: Mark Blythe, the Irish guy who predicted Brexit & Trump

I don't think it was any coincidence that the major inflationary impulse of the 1970s overlapped with one of the greatest non-wartime increases in female labour force participation. A perfectly logical response to declining real incomes...send the wife out to work. And the former stigma of doing that was washed off by expanding the definition of what it meant to be a feminist, the establishment of the daycare industry (to solve that inconvenient problem) and a host of government incentives and legislative supports because, of course, more workers means more tax revenue.

Wouldn't one think that this should have the opposite effect? That is, that adding a bunch of people to the labor pool should give employers more options to pay less money, create more potential employees applying for each job, and drive wages down? If anything, I would imagine that inflation and wages would have been higher in the 1970s had many fewer women entered the workforce? At least I believe that's the more standard econ-101 view of the world. As often happens, you might be looking at some deeper mechanism than supply and demand which I am missing in my blissful obliviousness here, though...

But you can even see the shift in the Fed's plug-in variables they use for projections. After 1975, they assume "the natural rate of unemployment" (I hate that phrase) skyrockets. They used between 2.5% and 3.1% from the LBJ era until 1975. Then, in the June meeting, Burns bumps it to 8.2%. Briefly, for a year, between '78 and '79, Miller takes over and slashes it to 4.6%. Then Volker comes in and keeps that number at 8.0% for the next decade. Greenspan cuts it to 6.2% and leaves it there for the next decade. But either way, the overall point is that they assume around that time that there will be more unemployment, not less, and so they stop targeting it as much as they target inflation.

But it's also clear that the inflation issue was a world-wide phenomenon. The Nixon Shock took us into a world of fiat currency for the first time. And so it always feels easy to view things through an American lens. But it's clear that the 1st world was moving in lock-step through the post-war era:

Having already exhausted the choice of putting the spouse into the workplace to make ends meet some 4 decades ago, and having watched real incomes and real purchasing power steadily erode through the allegedly "deflationary" period since the Volcker induced early '80s recessions, the next logical response was for households to leverage up in the secular declining interest rate environment to maintain their standard of living. And with the aid of ever more creative credit products that worked real well. Until it didn't, which event was marked by the 08/09 financial calamity. And there seems no more rabbits to be pulled from that hat since.

There have been some. Corporate debt and student loans have grown unabated. Believe it or not, housing is nearly at bubble highs in terms of prices and total debt load. Nearly the whole world is increasing leverage, and certainly the whole 'developed world' is.



But you're very right in terms of the rate of growth in these sectors. The debt went somewhere else. Government picked up the tab and the slack. Still, total debt loads worldwide continue their unabated growth...and this is all sort of a corollary of the big insight of Picketty, right? r>g. Return on capital exceeds growth. Debt increases as a percent of GDP. Inequality grows. Inflation stays low. It's a structural thing. And since every institution in the world moved to make sure that we will never write off debt or do any sort of jubilee or even allow old fashioned bankruptcy in many cases, the legal/political/finance system is ossifying the possibilities. As they do, and they take options off the table, people fight to regain a seat at the table...hence part of the rise of the new nationalism (or populism is you want to call it that).

The scariest thing about the whole r>g argument is that if there's no way to lower the debt load outside of war, and the debt load is already at 300% of world GDP and growing--high enough to ensure that developed countries' standards of living cannot and will not improve for the masses, then probably rather than suffer 3 or 4 generations of slow stagnation and decline, a whole lot of people will want to have that war. As private debts more and more get shifted onto the public ledger (socialism for the rich), and we're doing this at a compound growth rate good enough to double every 8 years or so lately, then the idea of whom one would war with and how the debts might be erased starts getting clearer.

There were and are other options. But they require the ruling class to give up a small stake in their own wealth and power. And since they are not willing to do so under any circumstances, and in fact are more interested in punishing and impoverishing the working class, robbing their pensions blind, and privatizing everything nature gave us and attaching a fee-for-service to it (rentier-ing), the medium-term future seems relatively easy to predict. The question is only where the 'debt wall' is. In stumbling around and trying to find it, I imagine we'll see bigger and deeper bubbles and boom-bust cycles until the real big one comes.

I agree with you dcarrigg. Call it whatever - the 1%, the "elites", the "protected" vs the "unprotected" (terminology I first read in one of John Mauldin's musings iirc), or anything else. The rapidly growing stratification might as well be a 21st Century version of the society portrayed in Downton Abbey; the fascination with the lavish homes of Hollywood stars and the Hampton residences of the Earls of Wall Street seem eerily similar. The lecturing from this cohort about the "uneducated" and the "uninformed", and we know which candidate their money went to, echos the ancient theme that the lower classes should understand and accept their place. The problem is today's "Downton servant class" is not content, unlike many of their television counterparts. Imagine that.

In some ways, I think it was easier to be discontent 100 years ago than now. In 1916, didn't matter if you lived in Ireland or India, the enemy was obvious. Anti-colonial nationalist movements only had to look for the foreign invader and fight like hell to get them out. The new game is much more complicated and insidious. You can be a billionaire from Armenia or Nigeria or Sri Lanka or Uruguay the same as you can be a billionaire from the United States. And you might even have an exceptional kid who's good enough to get into the schools they go to. But you will never, ever have a chance to get into their rarified air, unless maybe your kids start with millions...

I suppose the point is that it's much easier to inherit into that club than to enter it by merit, and even if you enter it by merit, you probably inherited a big leg up. The problem is that they are currently and have been for decades changing the laws such that the inheritors have and get to keep and pass on more and more power and money without having to show any merit at all for it. The rules of the game in nearly any country in 2010 make it far easier for a billionaire to ensure that his great-great-great-grandkids will be powerful billionaires regardless of their ability than the rules of the game in 1970 did. And the big problem with this, of course, is that these kids really grew up in rarified air, and they never had to or have to interact with the working class for any real part of their lives ever. And the second big problem is that incompetent people born into wealth and power tend to suffer from the Dunning-Krueger effect the same as anybody else. Only entire industries, economies, cities, countries, etc. are on the line. And the people inheriting the power are no longer the best and brightest. They're the ones whose granddaddies were.

What next? Remove the right to vote, except for the chosen few? Seems some of the anti-referendum sentiment being openly expressed now, especially in Europe and in Canada, is the leading edge of exactly that.

I think that's a big reason of why people on the left and right who hate trade deals hate them. They happen under special circumstances with special rules largely outside of normal democratic oversight and transparency. And when the ruling elite don't get their preferred outcome out of democracy, they quickly seem to start disregarding it and working to subvert it these days, don't they?

I mean, the big story of--let's say 1992 to 2016--was the rise of the 'third way' labor / liberals / social democrats. Your Gerhardt Schroeder's and Tony Blairs and Bill Clintons. The idea was to take the old union / working class / labor / class politics left and convert it into a finance / pigouvian punishment / gdp growth / identity politics left instead. It succeeded for about a generation...24 years. But it already was looking tired before it (mercifully) died in 2016. The SPD has been dead in Germany for years, split with Die Linke, forming coalitions to keep CDU/CSU Merkel in power. Labor is just as screwed up in the UK. They lost Scotland. They have zero chance at ever winning in England. They are barely a second party. The Socialists in France haven't done too much better. Meanwhile, the Democrats are down to what? 27 of 99 legislative chambers at the state level? 18 out of 50 Governors? 236 out of 535 national legislators (this is the best number they have!)? 4 out of 9 eventual Supreme Court seats, likely soon to be 2 or 3 out of 9? They're barely a second party, especially at the local level where they are all but extinct.

And the thing that all the "New Left" parties and leaders like these had in common was a penchant for removing democratic control, hatching deals among elites behind closed doors, putting too much faith in contrarian fleeting economic theory/fads that get disproven 10 years down the line, slashing safety nets and old age pensions, and forcing all this stuff onto people by telling them "it's for their own good!" Of course, they have consistently lost people by doing this for years now, to the point where what they have left is a hodge-podge of mostly super-wealthy elite backing with voting support of the super poor. The working/middle class only votes their way now if they have some sort of connection to the party for other reasons.

And yet still, they demonize the people who vote the way they wouldn't on a referendum, as if such unpopular parties can afford to be alienating even more people...meanwhile, on the right, you get people like Peter Thiel who openly says he hates Democracy and thinks it's incompatible with Capitalism, which he likes better, and the man gets a speaking slot at the RNC...it wasn't so long ago that high-strung Germans who openly despise Democracy would not be welcome to speak at any major political party's convention...they'd get investigated instead. Now, they get to place people directly in the Whitehouse. Very strange times indeed.