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Cash still flowing to pockets of a few | Rich Elfers

By RICH ELFERS
Enumclaw Courier Herald Columnist
July 23, 2014 · 4:43 PM
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“Designed by Apple in California. Assembled in China.”

This is Apple’s eight-word business plan found on the back of your iPhone. This business plan has made Apple the most valuable company in the world with $500 billion in market capitalization. As the article, “New World Order,” described in the July/August 2014 “Foreign Affairs” notes, we are living in an age of economic and technological megatrends. This growth of technology and globalization will change our lives and will deeply affect the job opportunities of our children.

These changes will continue a 30-year trend where the nation’s and the world’s wealth will continue to flow to the pockets of a few and out of the pockets of the poor and middle class.

The old Economics 101 model was, “Technological progress will lift all boats equally, making all workers more productive and hence more valuable.”  The new economic model is one where, “Superstar-based technical change is upending the global economy.”

I have a digital scanner on my copy machine, which is able to duplicate data that can be sent at virtually zero cost in seconds to almost anywhere in the world via email. This is an example of the rapid exchange of not only ideas, but also productivity. This type of productivity creates “winner-takes-all or winner-takes-most” markets.

The increasing use of automation and robotics, 3-D printing and artificial intelligence will mean the least skilled in this country and in developing nations will be the most deeply affected and harmed by these changes.

The last three words of Apple’s eight-word business plan are being transformed in front of us. Cheap labor being performed in China, Southeast Asia and Latin America is being “re-shored” to America, but with machines doing the work, not humans.

The “Foreign Affairs” article uses the example of Instagram, a photo sharing application. Fourteen people created the company without needing many unskilled workers or even much money. The idea went viral. After a year and a half, the company sold for $750 million! Ironically, Kodak, a photo company that at its height employed 145,000 and had billions in assets, went bankrupt near the same time.

A few superstars make millions, while the masses salaries stagnate and/or their jobs disappear. This is true in sports and music, as well as on the Internet. As time passes, more of the economy is being transformed by the developing technology: retail, manufacturing, finance and marketing.  “And sure enough, the United States today features one of the world’s highest levels of real GDP per capita – even as its median income has essentially stagnated for two decades,” the article states.

This brings up a troubling question: Who will be able to afford to buy these newly developed products if jobs disappear and incomes continue to stagnate?

These changes are likely to be permanent and pervasive. Trying to prepare for these changes for both our children and ourselves is challenging for the best of us. Those who have fewer opportunities and resources, both financially and educationally, will be hurt the most.

Schools will need to change as competition from more cheaply paid graduates in other parts of the world make it even more difficult to find jobs in the U.S. High-quality education, health care and retirement security must be addressed to avoid increasing the gap between the haves and have-nots. To ignore this issue is to invite political and economic unrest.

According to the authors, the strategy to combat these enormous technological shifts is “intellectually simple, but politically difficult”: increase basic research in health, science and technology, in education and fix our decaying infrastructure; roads, sanitation, energy and communications.  These would give this nation long-term economic growth to make the necessary adjustments.

Perhaps the McCleary decision requiring full funding of K-12 education will help Washington state keep up with these trends, if only the Legislature will comply.

The first step in this process is to understand the rapid changes taking place in front of us that are often too close to see clearly. Not facing reality will see a continuation of the increasing gap between those who are doing well in our society and those who are left behind. To do nothing is to invite more of the same.

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