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To: russwinter who wrote (19035)	9/25/2004 2:46:42 PM
From: mishedlo	Read Replies (6) of 107342

There was an Interesting article by John Mauldin this week on the concept of a post-industrial society to a world driven by intellectual property (IP) rather than manufacturing. http://www.frontlinethoughts.com/printarticle.asp?id=mwo092404 The following sentence in the article got my attention: “I think this new Think/Sweat thing will create more wealth for more people, not just the U.S. but around the world, than the Industrial Revolution ever did.” The above appears to be the prevailing view. Everyone seems to think that there will be a quick savior of some kind that will miraculously create loads of new high paying jobs in the US just as the industrial revolution did in the 20’s, and the railroad building did in the 1880s. I hear it time and time again that outsourcing is creating jobs, and that we do not need manufacturing, and that freeing up “menial manufacturing” jobs will leave the “best jobs here” and there will be more and more of them. Let’s explore that idea a bit. Can we really just sit back and relax as we get China to do the "dirty work" of manufacturing for us, while we sit back and get rich thinking? Although the prevailing view is that “jobs growth is just around the corner”, and it will be “good paying jobs”. Hmmm. Is it really possible that intellectual property (IP) creates more wealth than was generated before? Sure why not? Will there be lots of small companies cashing in big time? Yes! Are the masses going to cash in on it? Unfortunately, No! Let's Compare: Henry Ford put the masses to work. He paid them increasing wages and lessoned the work week. He started a trend towards giving workers more real benefits: more time off, vacations, pension plans, etc, etc, etc. The US standard of living was constantly rising. IMO, the opposite is happening today. In many jobs, hours are increasing (but wages are capped at 40 hours), benefits across the board are being reduced, and we keep losing high paying jobs, not for "great thinker" jobs, but for jobs at Walmart, Kmart, and McDonalds. The notion that we will keep the "best jobs here" is the most preposterous part of the "outsourcing will create jobs" story line. Well yes, we are creating jobs, no not here, but in India and China. Furthermore China and India are churning out lots more engineers and tech graduates than the US. It is silly to think the US has a monopoly on "brilliant thinking". Wage differentials are just too great, and more and more research jobs will be shifting overseas as well. So too will we begin to see a shift towards more and more IP coming from overseas rather than from the US. The trend is the trend is the trend. The trend towards rising real wages and rising standard of living in the US is quite simply over. I am not trying to be a pessimist; I am merely stating what I believe to be obvious. Wealth is being concentrated at the top not shared with the masses. The middle class will (is?) beginning to shrink. More people in the US are in poverty than 4 years ago, in spite of this “great reflation”. What happens when the stimulus stops? Bear in mind I am not blaming outsourcing for the loss of jobs. Once we opened Pandora's deflationary box otherwise knows as the Internet, we created as much disruption if not more than the industrial revolution did. Initially many paper millionaires created, but those that that held on to their IPO options find they are now worthless. Will there be more companies and more opportunities. Yes, but where? Venture capitalist's are now demanding to see “an India and China Plan” for every product or idea. Just how many jobs will that that create HERE? More wealth? Perhaps. But unlike the industrial Revolution, there is not a snowball's chance in hell the masses participate in any new IP revolution. Global wage arbitrage makes all the difference and the internet assures that “great thinking” can just as easily take place outside the US and at a far cheaper cost to boot. The bottom line results of this trend are many: 1)Wealth is being increasingly concentrated at the top 2)Standards of living in the US will fall as standard of living in India and China rise. 3)Benefits and real wages in the US are likely to keep falling 4)Retirement ages will rise Look around you. Pension plans are going bust. Not only are future benefits being reduced, but benefits already earned are being discarded. Talk to steel workers and airline workers. How long before GM pension plan blows up and payments are reduced. Real wages are declining and our standard of living is being supported only by an ever increasing mountain of debt. It is clear to me that we are headed in a period of a shrinking middle class, lowered standard of living, lower benefits, and increased concentration of wealth at the top and the idea that a new IP revolution is going to somehow going to create load of new jobs and more wealth for the masses is preposterous. Mike Shedlock

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