Declining Standard of Living

All the consumer confidence, "inflation" angst and other concerns of the common man and woman in the past two decades really reflect a consensus that their standard of living is declining. Standard of living is hard to measure and is a moving target. How much do you have to work to realize the same quality and quantity in your daily life ?

No governmental data captures this, if it could be measured at all.

Here's an example. You used to mow your own lawn, because you were fairly young and energetic, had the free time and liked the fresh air and exercise. But as your employer imposed new work burdens on you - unpaid - you now must hire a fellow to do it. You must pay the mower, so are poorer. Your "household profit" is lower. BUT ... GDP rises. That "domestic product" is now part of the measured GDP of the nation, so it "appears" the nation is more productive. Of course, it's not.

Of course, my ofted cited example of cooking food might fit this picture, too. Your commute has become really long as the traffic gets worse & worse every year. So your free time is less, and you now buy more prepared foods as you feel less time to cook, even if you enjoy cooking. So that personal time is again transferred to the "measured GDP" as your purchases increase it. Overall, your standard of living is less, but GDP says it's more.

Notice that neither example has any connection with "inflation". Really, one must identify and name the problem correctly to realize any telic value from analysis. Calling a broader problem "inflation" is a mistake. Certainly, much higher oil prices in the US and EU make everyone there poorer. But that's not "inflation", it's just higher oil prices.

Technology makes some work easier, but does the common man really realize the profit ? In some cases, the answer is yes. For example the iPod really has made much free time more pleasant as one can conveniently listen to music or books while performing other tasks, or just taking a walk. In other cases, no. The Blackberry or cell phone from the employer simply permits him to capture more of the employee's time off the job and make him subject to call or responsibility more hours every day or weekend. All that is unpaid. So the company or boss got the profit of that technology.

Suppose management screws up and now must cut costs. The common working man suffers more restrictions or must figure out how to perform 1.5 or 2 jobs for no extra pay. His standard of living goes down.

Suppose the government shifts spending to support rich farmers while cutting Medicaid or Medicare reimbursements. No net change in GDP results, but lots of health care workers are poorer while a few rich farmers get more money. Many people have a lower standard of living.

Suppose an educational institution's management spends more money on buildings and sports, while adding work requirements to professors/teachers - more teaching, paperwork or class size. GDP does not change but the professors/teachers have a lower standard of living.

Suppose state & local government raise taxes. They take that money from you and spend it on something wasteful, like patronage jobs for the second cousins of the state legislators. Net change in GDP is zero. The common man has a lower standard of living.

Here's another angle. Who capures the "profit" of productivity ? US tax and labor laws really favor equipment over people. A machine can be depreciated, junked as needed, can't sue, and no social security, medicare or uinemployment taxes are due. So companies naturally favor the machine. Voice mail permits a company to fire its receptionists and some secretaries, making "productivity" go up. The person loses the job. Government economic statistics seem "better", but certainly the standard of living of the people is less.

Who has captured the "profit" from great productivity gains of the past two decades ? Overall, except in a few cases such as the iPod, my opinion is that the "ruling classes" have, aka the "rich & powerful". CEOs, some lawyers, powerful governmental persons, some money managers, etc. That's the source of asset price inflation in so many places, such as the sun & surf places or in the art markets, etc. The huge growth in hedge funds is a sign of that excess profit sloshing around, creating more problems.

I'm noodling over these issues and will write more in the future. But I think inflation is not the problem It's a general decline in standard of living for the common man as the ruling classes take more and more of the admittedly growing economic pie. Not enough - or any - of the growth created by great technology and process productivity gains is shared with the common man.

I don't yet have a solution - still thinking this through to find one consistent liberty and freedom required by my populist libertarian philosophy. Transferring more wealth to the government to be redistributed is definitely NOT the solution, as it simply give more power to the DC ( & Brussels) ruling classes. The failure of that approach was proven by the success of the Reagan revolution. But something needs to be done to give the common man a square deal from this growing economy.

Word of the Day

"Ideate" - verb [$10] Psychology; "Ideation" - noun [$10]
Ideate means 1. (transitive) to imagine, conceive; 2. (intransitive) form ideas.
Sentence: Bunkerman will intensely ideate today for ways to give the common man a square deal while preserving as much freedom as possible.