The Great Recession Is Now The Great Restructuring

Back in the Great Depression, the big problem was not just the depression; it was a Great Transition over a twenty-year period from 1930 to 1950. Arnold Kling:

Demand fell for human effort such as lifting, squeezing, and hammering. Demand increased for workers who could read and follow directions. The evolutionary process eventually changed us from a nation of laborers to a nation of clerks.

The economy of clerks lasted for about half a century. But now the economy needs more than clerks who can follow orders. "If a job can be characterized by a precise set of instructions, then that job is a candidate to be automated or outsourced to modestly educated workers in developing countries." The result is the "squeezed middle." There is still a need for low skills, and high-skilled people are in high demand. But people with limited skills get squeezed: what are all the clerks going to do now?

Kling sees three future scenarios. In the optimistic one, "the supply of workers adapts to changes in technology," but more likely, the future depends on how "institutions serve to ameliorate problems created by disparities in ability." In a world "where rewards are concentrated among those who are disciplined, self-directed learners with creative gifts," institutions may possibly develop "humane, rational approaches" for assisting the less creative. More likely, the elites will compete for resources as they "claim to be fighting on behalf of the disadvantaged."

This sort of top-down social mechanics is exactly what ails the modern world, and you can see it right there in Kling's reduction of resourceful humans into an abstract "supply of workers." It is an attitude that willfully misunderstands the whole story of the last half-millennium. Humans are not passive, mind-numbed robots sitting in a supply warehouse waiting to be organized into productivity by a brilliant overclass. Nowhere in Kling's analysis is the simple Hayekian understanding that millions of individual Americans right now are making decisions as consumers and producers, not to mention students and educators, that will inaugurate the future of the new America, with or without the participation of the overclass.

Let us not deny that we have a problem. But ever since the start of the Industrial Revolution in the 18th century, humans have been voting with their feet and migrating in their tens of millions to the industrial cities, and adapting themselves to the demands of the market system. Why not? Adapting, according to the evolutionists, is what humans do.

It's natural for people at the top to think that the only way you can run a massive industrial system is by rigid discipline dispensed by a wise and educated overclass. That is what the textile magnates thought when they adapted the discipline of the slave labor plantation to the manufactory. That is what the leaders of armies thought too when they invented Prussian discipline. But it has turned out that rigid discipline is not just evil; it is ineffective, and it is obvious why. Humans are inventive, adaptive, social creatures, and they thrive best when innovating, adapting, and socializing. That's why in the 1920s, the German Gen. von Seeckt abandoned Prussian discipline and decided that the German army needed soldiers to be "self-reliant, self-confident, dedicated, and joyful in taking responsibility."

The modern German economy is built on the same principle. Almost 80 percent of German workers are employed in the "Mittelstand" of small, family-owned, specialized businesses that work at being the best-in-class in some high-value global niche. Not much room for clerks in the Mittelstand -- not since World War II.

Even Walmart is dedicated to the principle of giving its lower-level workers the power to make significant decisions. So when well-intentioned educationists start to think about saving the poor "workers whose skills are limited to following directions in well-defined jobs," you start to worry. Is it possible that the people that brought us crony green capitalism, failed stimuli, bankrupt Fannies and Freddies, and government high schools from which 50 percent of the graduates need remedial help at college have anything to teach us on how to restructure the economy?

Elites have a role to play in modern society, and they can help with the Great Restructuring. But the path forward will be cleared by millions of ordinary Hayekian strivers and the innovation of a few unheralded geniuses, not by the credentialed great and good. The best thing our intelligent elite can do is go to Hippocratic reeducation camp and resolve to "do no harm."

God may not play dice, but He certainly likes a good laugh. Today, in America, the people that profess the religion of creativity and free expression are the very people who insist upon forcing everyone into rigid, one-size-fits-all plans for government restructuring. What a joke.

Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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