Email Exchange With Friends
Here is an interesting Email exchange I had with a few friends, one of which sent me the MIT article.
"Bob" writes "Buy American is a big theme with the robotics guys. My future son-in-law won't even buy his tux from a Hong Kong tailor. He refuses to buy anything from China. They view themselves as abolishing Chinese slave labor by making it uneconomic."
"John" responded "What do those people then do to feed themselves?"
"Bob" replied "The easy answer is that it isn't our duty or problem to keep a slave state prospering and fed. You are not going to wipe out China's slave labor overnight. If China's elite sees that its low wage slave labor will no longer reap profits, they will do what other slave masters have done: educate its people so that they can compete in an economy where there are no slave conditions."
In Praise of Cheap Labor
"Mish" says, I fail to see where the above line of thinking goes.
We have come to a point where the minimum wage is 200% too much. How does hiring Baxter at $3.40 per hour prevent slave labor in China? Is no job better than some job?
Baxter is a hugely deflationary force. Increasing the minimum wage only exacerbates the problem.
Oddly enough, Paul Krugman agrees, or at least he once did before he became the "Conscience of a Liberal".
Want proof? Please consider In Praise of Cheap Labor; Are Bad Jobs at Bad Wages Better than No Jobs at All?
Taxing Robots Cannot Work
Economist Paul Krugman and others are now pondering heavy taxes on robots. Is that the answer?
How can it be? Paying more people to do nothing (or to do jobs robots can do cheaper) cannot possibly solve anything. Such practices encourage the birth of more people when there are fewer jobs to be had.
Either technology creates jobs long-term or it doesn't. I believe it does, and on that score I am an optimist (I just cannot say when it will happen).
Let's assume I am wrong. Then taxing robots to meet some artificial living-wage standard can hardly be the answer. Encouraging the birth of more unneeded, unproductive people is a sure-fire way to start a major war.
In either reality, Krugman is wrong.
Fed Cannot Win a Fight Against Robots
The problem is not that wages are too low. Rather, the problem is expenses are two high.
The remedy then is certainly not higher minimum wages (which previously encouraged more outsourcing and now encourages more robots), but rather making the dollar go further.
In that regard, it's a mad world in which the central bankers and the Keynesian clowns are both hell-bent on forcing wages and prices up, when every attempt to do so accelerates the use of more robots.
There is nothing wrong with falling wages provided costs fall as well. Who (other than Keynesian clowns and misguided union activists) does not want lower prices?
Moreover, falling prices as a result of increasing productivity over time is the natural state of affairs. For example, one farmer today produces as much goods as 100 farmers a few decades ago.
Certainly the price of agricultural goods is up over that time frame, but far less than the corresponding increase in money supply and credit (the true measure of inflation).
Robots an Invincible Force
Central banks are powerless to stop the advance of technology. Robots in particular are an invincible force.
Resistance is futile.
The Fed, central banks, and governments around the globe need to embrace technology and its deflationary forces. Otherwise, the result will be a sad combination of fewer jobs, rising population, higher prices, and a ultimately a major war.
Mike "Mish" Shedlock