Normalization remains the most normal economic process, always continuous but only rarely establishing stasis. What are the influences starting a new renormalization and what events and activities lead to stasis?
Note: Renormalization is not recalibration. Recalibration involves new activities, such as automation: not so in renormalization. Nevertheless, renormalization is part of recalibration.
Today, end of December 2017, the U.S.A. very much is at a stasis not favorable to the vast majority of the citizens. Yet, changing the economy to allow for a living wage working 40 hours a week, paying for health care, providing for retirement, and rebuilding infrastructure is a major renormaliztion in every aspect of our economic life. Welcome to tomorrow.
High inflation and just a bit of deflation are both renormalizing affects. Major tax changes also require renormalization, mostly due to taking wealth away from consumption and unintended effects.
The amount of time of a stasis period exists usually is shorter than the time to reach a stasis. In other words sorting things out takes time, whether after a plague, major war, or population increases and movements. The time of a stasis exits significantly shortened with the advent of modern communications and longer lives.
Although many of the modern causes are similar to previous economic cycles, this discussion will stay in the post-1990 period. Several influences from 1960 onward are important certainly, yet will only be discussed as to their affects, not causes. In fact, here's a list of important influence:
- WW II military training and population movement followed by the G.I. bill increasing the total educational level of the country.
- Large increase of college population in the 1960's (including me) and the number of engineers from new/enlarged engineering schools.
- Invention of the transistor and assorted electronic stuff (I was involved in this). Even simple things like answering machines and boom boxes.
- Improvements in transportation such as the Interstate system and containerization, both more influential than anyone imagined. The change to diesel locomotives was another major influence. Steam engines were really expensive to maintain.
- Changes to consumer product delivery increased consumption. The move to the suburbs created big-box chains like S. Klein's,
- Viet Nam war and the space program was more about technology advances for our discussion.
- The introduction of the personal computer in the 1980's increased world wealth far more than the Reagan tax cuts. The main effect of the tax cuts was providing funds for computer development. In fact, the increase of world wealth caused the transition of centralized economic control in Russia and broke up their empire: Nothing Reagan did.: Communism cannot exist with increases in wealth: check out my Theory of the Three Economic Societies for an explanation. Personal computers allow the amount of programming, and therefore the amount of programs available to run our economy.
- The changes in Wall Street resulted from the increases in programming.
- The 1980's started the use of government to increase the concentration of wealth in the top 1%. The greater the concentration the more likely a stasis would emerge - and it did.
- Allowing almost unlimited legal and illegal immigration benefited the wealthy both in skills - construction - as well as keeping a roof over wages. Keep in mind if the Republican conservatives who profess to hate immigrants could have stopped most illegal immigration by punishing employers rather than the illegal immigrants. Employers liked the wealth increases caused by the illegal immigration. The wage levels have keep very constant for the last two decades. And although the economists and the government say they want higher wages as the county does better, they really don't mean it. Increases in wages are a real cause of a renormalization and will cause many disruptions in a short (whatever short will mean) time frame.
- The 1990's, with both spouses working, finally separated morals and history from their children. We are now seeing how the college populations learned to manipulate parents in the 1980-1990's which now shows their skills to manipulate educational institutions.
Example 1: Raising minimum wages
By itself raising minimum wages to enable 2 wage earners in a family to earn enough to avoid subsidies is a good idea, and eventually must occur. The wealthy find having the middle-class be taxed to provide subsidies such as food stamps and rent vouchers is better than raising wages. This is the current normal and changing to living wages without subsidies provides enough unknowns to scare the wealthy. The largest unknown is the renormalization of the wages of the rest of us and its affect on the distribution of wealth.
The most prominent question posed by politicians is how the increase at the bottom will affect consumption of the above economic strata and "entry level" jobs. Rarely do we hear about raising wages could decrease taxes by eliminating subsidies. Fast food consumption could fall if the cost of the meal is closer to restaurants with better food who are already paying more than minimum wages.
Example 2: Raising wages to attract engineers
Supposedly to attract the number of engineers we need to be a manufacturing nation the answer should be raising wages. Two issues come to the fore: the increase in wages would be very dramatic to change the number of engineering students and two, that wage level distorts the ability of companies without the resources of Google attract needed personnel without having to change their pricing structure.
Pushing wages up at this level would also push up wages of similar jobs and the cost of consuming the products would grew. Some products, like earth-moving equipment and airplanes, might not move so much; although if you Boeing about how sensitive they are to professional salaries they would say VERY.
Either way, disruptions pick winners and losers. And even though we currently look very stable, some people an afford a plumber and others cannot. A stasis where half the populations cannot afford people with skills I not a good stasis.
Not everything does not revolve around money; Retiring engineers are not being replaced which will affect manufacturing in America and a large amount of time will be required to refill the pipeline. Renormalization can take time no matter how much money you throw at the situation. Renormalization might require working with Chinese companies or Indian engineers.
Renormalizations without planning - which would include tax policy and regulations favoring the middle class - will result in short and bad stasis.
How do we know when a good status is reached? When changes like the cost of retirement is not a surprise. When the education system does not rely on the next level of education to make up for the mistakes of high school. When solid middle-class people do not have to borrow to consume; When infrastructure maintenance is included in budgets.
Wen the ideology everyone is responsible for themselves and poor people are poor because they want to be poor, a stasis will only work if we believe feudalism is the ideal economic system.