Sunday, September 13, 2015

Income and Wage Potential: What is Still Possible?

Even though reliable wage and income constructs are no longer a given, it's too easy to chalk up a lack of economic access to "inevitable" factors. Individuals tend to be blamed for their own lack of participation, or "unwillingness to produce". But what else is at stake? Once wealth creation becomes difficult - for whatever reason - more efforts are needed, for the restoration of economic access and resource diversity where people are (often) expected to live out their lives. While the most obvious mobility concerns involve nations in turmoil, there's "silent" struggles for economic access in developed nations, as well.

Most obvious in all this is that global long term growth is uncertain, partly due to changes in economic circumstance which were maintained up to the Great Recession. Contributing to what has become tight money conditions, is a growing consensus that a decoupling has occurred in developed countries. Even though the decoupling is mostly in a relative sense, neither the political left or right is ready to acknowledge their denial (one hears of "demand saturation") of the still unfulfilled demand for both work and service product.

Instead of making economic access easier, special interests thus far have not budged from their efforts to make it more difficult to achieve. This likely has bearing why the Fed does not recognize its own complicity, in the destruction of wealth which has transpired in recent years. Indeed, central bankers assumed the same brutal stance as other policy makers, as they became more focused on limits to growth which were "supposedly" necessary. As Scott Sumner noted in a recent post, the Fed severely shorted Main Street as it bumped up the schedule for IOR - a tool which in my mind never should have been adopted in the first place.

However, the fact that services markets are in need of reform, may play a greater role in marketplace limits than the slowing of material production. A combination of NIMBY factors which stand in the way of economic access, plus growing reluctance to budget services through government assistance, makes internal reform unlikely. Even so, alternative systems need consideration outside this equilibrium, if governments are to avoid a serious decline in wealth creation in the coming decades. Such systems will also have to reconsider how wealth creation remains possible - particularly that which does not require credit.

Part of the problem for income and wages at local levels, is that centralized economic systems mostly bypass individual capacity. Decentralized systems would look radically different from much of the decentralized economies of a century ago, in that they need to focus on time based services as a starting point. Even though some areas would attempt "slow" economies (local artisanal and agricultural production), this option is more viable for tourist oriented regions. Just the same, this approach would not negate the need to reestablish new services economies on more broad based terms.

In all of this, citizens will need to try multiple approaches (often, initially, with lightweight and flexible infrastructure) to discover which forms of production are viable. At the very least, direct interaction with resource use and with other individuals, will give people a chance to rediscover their own initiative in the workplace. Fortunately, knowledge based endeavor can also be approached in ways which make communities desirable tourist destinations. The need for income sources as opposed to wage sources will become more important for all citizens. After all, the most reliable wage streams of primary equilibrium originate from locales where mass production is still staged, alongside the high skills services compensation which these forms of production make possible.

At issue in all of this - in spite of the ongoing arguments between Keynesian thought, tight money advocates and market monetarists as well, is what happens in the real economy. While the Fed is at fault for making circumstance worse, there is no excuse for current generations to concede defeat, knowing full well the numbers of world citizens who will have to find means to make a living. There needs to be an understandable process for dialogue regarding the real economy, even if reforms mostly occur outside the boundaries of what is considered primary equilibrium.

True, governments may be able to supplement low incomes to some degree, for those who still have reliable jobs which also mean reliable wages. But where new wealth is possible, local corporations will likely assist participants in their efforts to discover new income potential, to supplement the common assistance wage base.

The main reason that local corporations (knowledge use systems) would be considered alternative equilibrium, is that they would be self governing - not in the sense of cultural separation from surrounding governments - but in terms of finding new means of wealth creation which is difficult to find in the labyrinth of government and special interest circumstance. Hence these alternative equilibrium would serve a valuable purpose for rediscovery. Even more, they could provide a better understanding for overall wealth generation, to assist populations in their efforts to maintain economic stability.

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