Survival__ Structuring Prosperity for Yourself and the Nation - Charles George Smith [91]
Because every other nation/trading bloc is still pursuing the export/surplus model: sell more than you buy. That requires they not only accept the dollar arbitrage, they must actively support it. Many observers are astounded by the dollar's strength: this profligate nation's currency should be plummeting like a stone, yet instead it rises!
Once you understand the global dollar arbitrage--we buy your goods to support your export/surplus model, and you accept a dollar intrinsically worth less than the goods sold, and everyone walks away happy--then this seeming impossibility makes sense.
Were the dollar to fall, as many expect, from 80 on the DXY (dollar index) to say 45, then the global export/surplus model of everyone selling their surplus production to the U.S. will no longer work. Since there is no Plan B, then it's in everyone's interest to keep the game going. It's a lot less painful to accept a "hidden" loss via dollar arbitrage than it is to face structural unemployment and civil unrest if the export model breaks down.
We also read how China is going to transition to a domestic economy, but a study of history finds virtually no examples of such a model. Wealth and thus prosperity has always been created by trade, and it precisely the point at which China turned away from global trade in the 16th century that its long decline began.
I recently toured a 40-acre biodynamic vineyard in Sonoma County, California. Biodynamic is basically one step beyond organic: not only are no pesticides or chemical fertilizers used, virtually no outside inputs are used: the land supports itself, as it were, by careful shepherding of insects, mulching, a few animals which graze off the grass/ground cover, etc.
Yes, the vineyard has machinery which operates on oil: there is certainly an enormous energy input from outside the system. But other than the cost of shipping the product (wine) to market and transporting visitors to the site, most of the work is manual labor.
This model employs about a dozen people year-round. Most of the work is hard physical labor: pruning vines, spreading mulch, etc. This work cannot be entirely mechanized, and software can do little to add value/productivity. But then the question becomes: what is the tradable value of the resulting product? If the wine sells for $30+ a bottle, then the vineyard is a viable model in our high-cost economy. But if the tradable value of the product declines to say $10 a bottle, then the wages generated by the enterprise must likewise fall.
Rifkin is an optimist, as he sees the possibility of a new model in which "paying work" is replaced by "work" in a high-tech hydrogen-based economy.
The problem with this view is two-fold. First, hydrogen is not an energy source (except in fusion reactors which remain science fiction) but a method of storing energy generated by other means. Thus the replacement sources of energy as fossil fuels decline must be constructed before a hydrogen economy could arise.
Secondly, what would stop the hydrogen economy from scaling up (the Scalability Trap) to the point few workers were needed? Regardless of the future industry being touted (algae biofuels, nanotechnology, the hydrogen economy, etc.), each must be scalable to be important. And if they are scalable, then they will enter the Scalability Trap.
Thus the sustainability of the "full employment model" is questionable regardless of the specific nature of the "new industries" being hyped as "the foundation of the New Economy."
In Section Two, I propose that a model of hybrid work which combines some paid work with bartered/traded labor (unpaid work) may be better suited to the realities we face. In hybrid work, the focus is not on maximizing income but on being productive and generating surplus.
New concepts in this chapter:
Hybrid work
Chapter Fifteen: Interlocking Traps
In the course of this analysis I have attempted to identify cycles which illuminate our present circumstances and feedback loops which tend to counter (built-in stabilizers) or reinforce long-term