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Zombies of Voodoo Economics, by Paul Krugman, NY Times: According to many reports, Donald Trump is getting frantic as his administration nears the 100-day mark. It's an arbitrary line in the sand, but one he himself touted in many pre-inauguration boasts. And it will be an occasion for numerous articles detailing how little of substance he has actually accomplished. ...
Mr. Trump sold himself to voters as unorthodox as well as effective. He was going to be a different kind of president, a consummate deal-maker who would transcend the usual ideological divide. His supporters should therefore be dismayed, not just by his failure to actually close any deals, but by the fact that he evidently has no new ideas to offer, just the same old snake oil the right has been peddling for decades.
We saw that on Trumpcare... And now we're seeing it on taxes. ... Whatever the details, Trumptax will be a big exercise in fantasy economics.
How do we know this? Last week Stephen Mnuchin, the Treasury secretary, told a financial industry audience that "the plan will pay for itself with growth." And we all know what that means..., history offers not a shred of support for faith in the pro-growth effects of tax cuts..., supply-side economics is a classic example of a zombie doctrine: a view that should have been killed by the evidence long ago... Why, then, does it persist? Because it offers a rationale for lower taxes on the wealthy...
Still, Donald Trump was supposed to be different. Guess what: he isn't.
To be fair, it's not clear whether Mr. Trump really believes in right-wing economic orthodoxy. He may just be looking for something, anything, he can call a win — and it's a lot easier to come up with a tax reform plan if you don't try to make things add up, if you just assume that extra growth and the revenue it brings will materialize out of thin air.
We might also note that a man who insists that he won the popular vote he lost, who insists that crime is at a record high when it's at a record low, doesn't need a fancy doctrine to claim that his budget adds up when it doesn't.
Still, the fact is that the Trump agenda so far is absolutely indistinguishable from what one might have expected from, say, Ted Cruz. It's just voodoo with extra bad math. Was that what his supporters expected?
The world may be headed toward "peak globalization". This shift could empower individuals and communities to strengthen democracy, while easing some of the most troublesome aspects of globalization.
'Peak globalization' may provide a pathway to preserving the best of globalization and global interconnectedness, enhancing economic and environmental sustainability, and empowering individuals and communities to strengthen democracy. At the same time, some of the most troublesome aspects of globalization may be eased, including massive financial transfers to energy producing countries (and companies) and loss of jobs to manufacturing platforms like China. This shift could bring relief to the 'losers' of globalization and ease populist, nationalist political pressures that are roiling the developed countries.
That is quite a claim, I realize. But let me explain the vision.
By 'peak globalization' I mean a point in the future – in some ways we are already seeing this – when the amount of physical stuff moving around the world peaks and begins to decline. By 'stuff,' I am referring to liquid fuels, coal, containers on ships, food, raw materials, etc. But I don't see peaking movement of people, information, data, and ideas around the world. In fact, while movement of stuff is slowing if not declining, digital flows are growing exponentially and are likely to continue to do so for the foreseeable future. We are moving toward increasing "just-in-time-production-at-the-point-of-consumption" of energy, food, and products.
The key factors moving us toward peak globalization and making it an economically viable alternative are new technologies and innovative businesses and business models. More specifically, exponential technologies and their 'democratization' have made possible these trends and sharply reduced the 'cost of entry' for creating businesses as the technologies have become available to almost anyone, anywhere. They have been subject to 'Moore's Law' of exponential growth in capacity and exponential decline in cost. Beginning with the microchip, which has had a billion-fold improvement in 40 years (10,000 times faster and 10 million times cheaper), the marginal cost of producing almost everything that can be digitized has fallen toward zero.
A hard copy of a book, for example, will always entail the cost of materials, printing, shipping, etc., even if the marginal cost falls as more copies are produced. But the marginal cost of a second digital copy, such as e-book or a streaming video or song, is nearly zero as it is simply a digital file sent over the Internet, the world's largest copy machine.
Moreover, the smartphone itself has capabilities that if purchased separately a generation ago would cost more than $900,000 in 2011 ($977,000 in 2017), as shown in the chart below from Peter Diamandis' book, Abundance (see below). Mobile broadband subscriptions had reached 4.3 billion by the end of 2016, according to Ericsson (3.9 billion smartphones plus other devices like tablets) and are forecast to reach 8 billion by 2022.
This technology alone provides access to half of the human population to artificial intelligence (from SIRI, search, and translation to cloud computing), geolocation with GPS, global free video calls with Skype, digital photography and free uploads to social network sites, free access to global knowledge, a million apps for a huge variety of purposes, and many other capabilities that were unavailable to most people on the planet only a few years ago. Artificial intelligence, which has improved exponentially in the last 2-3 years, is becoming a 'utility' available to entrepreneurs who can apply it to enhance almost all products and services.
Exponential technologies have led to the creation of platforms built on the two "platforms of platforms," the Internet and the GPS system, which functions as both the essential timing clock of the Internet and geolocation for millions of apps, from Google maps and Waze, to directions to your local restaurant or theater. Other 'platforms' have been built on these two underlying platforms, such as Google, Facebook, Baidu, Tencent, WeChat, WhatsApp, Snapchat, Twitter, Alibaba, Amazon Web Services (AWS), and many thousands more. The ecosystem of several million 'apps' have been built on smartphone platforms, including Apple IOS and Android. This has led to the creation of millions of startup businesses exploiting these platforms. Uber and Didi ride-hailing services, and Airbnb and Tujia home-sharing services, are platforms based on apps and mobile connectivity, which have led to employment of hundreds of thousands of drivers and income for more than a million property renters. Amazon Web Services, Microsoft Azure, and other cloud computing platforms provide global access to cheap and ubiquitous cloud-based computation, software-as-a-service, and artificial intelligence. Other exponential technologies are also functioning as platforms, including drones, robotics, computational biology, 3D printing, and the Internet of Things.
These platform technologies combined with exponential technologies have 'democratized technology' and have led to a sharp reduction in the 'cost of entry' for entrepreneurs to create new businesses. This has led to the proliferation of hundreds of thousands of startups all over the world that are leveraging the Internet, cloud computing, artificial intelligence, 3D printing, drones, apps, and biotech.
The cost of starting an Internet business has dropped precipitously toward zero as developers no longer require a major investment in servers and software but rather can rely on cloud-based computing power and software, sharply reducing costs and labor requirements. One estimate suggests that this cost dropped from about $5 million in 2000 to about $5,000 in 2011, (see below) and by 2017 the cost of building an app or Internet company is only hundreds of dollars, propelled by cloud open source software and cloud computing.
Digitization of biology has also led to order of magnitude declines in the cost of biotech development as experiments can be designed digitally and uploaded to cloud-based laboratories that will conduct the experiment for a small fraction of the cost of acquiring laboratory equipment and hiring lab technicians.
These new technologies and platforms are key contributors to and will in the future reinforce the trend toward "just-in-time-production-at-the-point-of-consumption" of energy, food, and products. Exponential technologies have created new possibilities or enhanced existing technologies for local and regional production of renewable energy, food, and an increasing array of productions. Since the pace of technological development is accelerating, all of these capabilities will likely improve rapidly in the next few years, benefiting from the application of artificial intelligence, cloud computing, robotics, new materials, mobile connectivity, computational biology, blockchain, and many other advances.
Renewable energy production, especially solar, is located at or relatively near the source of consumption. Although electricity generated by solar, wind, geothermal and other renewable sources can of course be transmitted over longer distances, it is mostly generated and consumed local or regionally. It is not transported around the world in tankers, ships, and pipelines like petroleum, coal and natural gas. Moreover, the fuel is free forever. There is no global price on sun or wind. The people relying on solar and wind power do not have to worry about price volatility and potential disruption of fuel supplies as a result of political, market, or natural causes. Renewables have their problems, of course, including intermittency and storage, and currently they work best if complementary to other sources, especially natural gas power plants that, unlike coal plants, can be turned on or off and modulated like a gas stove, and are half the carbon emissions of coal.
Within the next decades, it is likely that the intermittency and storage problems will be solved or greatly mitigated. In addition – and key to our future world – unlike coal and natural gas power plants, solar is completely scalable, from solar panels on individual homes or even cars and other devices, to large-scale solar farms. Solar can be connected with microgrids and even allow for autonomous electricity generation by homes, commercial buildings, and communities. It may be several decades before fossil fuel power plants can be completely phased out, but the development of renewables has become exponential in cost reduction and while significantly improving efficiency to now compete with coal and gas will eventually be much cheaper. Even now, renewables are obviously cheaper over time – if the fuel is free for solar and has to be continually purchased for coal and gas, at some point it is cheaper. Renewables are already far cheaper if the externalities are also included in the calculation, including carbon emissions and environmental degradation involved in obtaining and transporting fuel.
Food can be increasingly produced near the point of consumption with vertical farms that are beginning to proliferate and eventually with printed food and even printed or cultured meat. These sources bring production of food very near the consumer, so transportation costs, which are up to 70% the cost of food to consumers, are greatly reduced. The use of land and water are reduced by 95% or more, and energy use is cut by nearly 50%.
In addition, fertilizers and pesticides are not required and crops can be grown 365 days a year whatever the weather. The reduction of land and water use as well as the relative invulnerability to inclement weather will be increasingly important as the world faces the challenges of increasing food supplies by some 70% to feed a world of possibly 9.5 billion people in 2050 while also coping with the loss of arable land to desertification, degradation, and climate-change exacerbated drought, sea level rise, and extreme weather events.
While it may not be practical to grow grains, corn and other such crops in vertical farms, many vegetables and fruits can flourish in such facilities. In addition, cultured or printed meat is being developed – the big challenge is scaling up and reducing cost – that is based on cells from real animals without slaughtering animals. There are currently some 60 billion animals grown for food around the world and livestock alone counts for 15-20% of global emissions. Moreover, livestock places huge demands on land, water and energy. Like vertical farms, cultured or printed meat could be produced with no more land use than a brewery and with far less use of water and energy.
An increasing number of products can be manufactured on demand and customized at the point of consumption. 3D printing (additive manufacturing) allows for distributed manufacturing near the point of consumption, eliminating or reducing supply chains and factory production lines. 3D printers can print an entire finished product in one piece or reduce parts of larger products, such as engines, from many pieces to one piece (like the nozzles for GE's new Leap jet engine), reducing time and cost of manufacturing. 3D printing also allows for manufacturing geometries that are not possible through conventional subtractive manufacturing – such as a ball inside a ball inside a ball.
Such complexity is also free and nearly unlimited. Moreover, every time a 3D printer prints, it can be a different item – or put another way, no assembly line needs to be set up for every different product. And there is no cost benefit from scaling – each item can be customized and printed on demand. No inventories, no shipping of items across oceans, no carbon emissions from transport not only of the final product but of all the parts in that product shipped from suppliers to the OEM. Moreover, the process of 3D printing, which builds items layer by layer, produces almost no waste, unlike "subtractive manufacturing" in which an item is carved out of a piece of metal and more than 50% of the material can be useless waste.
3D printing is basically a general purpose technology that involves many different types of printers using different materials – from plastic to metals to ceramics to human cells – to produce a huge range of items, from human tissue and potentially human organs to household items and a wide range of industrial items for planes, trains and automobiles.
There are 3D printers on the International Space Station that can print spare parts and soon there will be robotically-controlled printers in the vacuum of space that can manufacture huge antenna and solar arrays and even much of the next space station and space vehicles. 3D printing is also highly scalable, from inexpensive 3D printers (several hundred dollars) for home and school use to increasingly capable and expensive printers for industrial production. There are also 3D printers for printing buildings, including houses and office buildings, and other infrastructure. These printers will greatly reduce the cost and time of construction as well as waste in the construction process and many will use recycled concrete to reduce resource consumption and disposal of concrete from destroyed buildings.
Universal manufacturing facilities
This is a very brief introduction to the technologies that can bring "just-in-time-production-at-the-point-of-consumption" of energy, food, and products to cities and regions. These technologies could significantly reduce carbon emissions and enhance environmental sustainability for communities and countries. They could also have significant economic benefits, which may be more difficult to envision and quantify. But new and good jobs would be created in building out, maintaining and managing the solar power infrastructure. Numerous 'universal manufacturing facilities'(UMFs) could be located throughout cities and regions. These could scale from a couple of people in a garage with a computer, Internet access, and a 3D printer who custom design and print relatively small and simple products for local consumption or even global sales (including their designs as STL files for others to print) to large UMF's with many 3D printers and other advanced manufacturing equipment and robots producing a wide range of products from pots and pans to automobile bodies and even food.
The UMFs could also recycle materials for printing feedstock and have mobile printers for constructing buildings and other infrastructure. These UMFs could provide a larger number of jobs, including not only designers of products and machine operators, but sales and delivery people as well as back office and management jobs. These would likely be relatively high-wage jobs and would be embedded in the community. The vertical farms, printed meat, and other food-related facilities would likewise have employment for a range of good jobs. In all these cases, there would be a need for software engineers designing products or acquiring and modifying designs from around the world as well as for building apps, running production facilities, applying artificial intelligence to improve production and distribution, managing social media for communications with customers, and many other IT activities. There would be need for education, but most of the jobs would not necessarily require college education but rather on-the-job training or local vocational education.
Means of production
All three areas of production – energy, food, and manufacturing – involve acquiring the means of production from other companies, often major corporations. This would range from solar panels and to 3D printers and leveraging the major platforms, including the 'platforms of platforms,' the Internet and GPS system and then the platforms built on the Internet and GPS, from cloud computing services like Amazon's AWS, IBM's AZURE, and Google Cloud Platform, to Facebook and Google and app stores for iOS and Android systems.
But the means of production once acquired – the energy system, the vertical farms, and the UMFs – would be at the point of consumption, not a continent away, and many would be locally created and controlled, including by individuals, small groups, co-ops, and municipalities. UMFs, vertical farms, and energy systems could be 'franchised' or owned by multinational corporations but still be locally producing energy, food, and products for local consumption. A model for this might be the recently announced partnership of UPS and SAP to create giant 3D printing facilities that could print parts, products, and prototypes on demand to be shipped to the local client by UPS to the local customer.
For the community or even the country as a whole, this trend could lead to a more resilient and self-reliant economy, especially for developing countries. This import-substitution approach would reduce export of capital to pay for material goods – energy, food, and other products. Even raw materials imports might significantly decrease since the production process would be much less wasteful and there would be new opportunities for recycling a wide range of discarded materials, potentially even steel and aluminum from the millions of junked cars, trucks, and other vehicles. At the same time, the two-way flow of digital information, including design files, would likely increase significantly as these communities would remain globally connected and a huge number of items would continue to be traded internationally.
This model suggests a shift toward a 'bottom up' economy that is more democratic, locally controlled, and likely to generate more local jobs. The global trends in democratization of technology make this vision technologically realistic as much of this technology already exists and is improving and scaling while exponentially decreasing in cost to become available to almost anyone anywhere. This includes not only access to key technologies, but also to education through digital platforms available globally. Online courses are available for free ranging from advanced physics, math, and engineering to skills training in 3D printing, solar installations, and building vertical farms. Social media platforms like Facebook can enable local and global collaboration and sharing of knowledge and best practices.
These new communities of producers can be the foundation for new forms of democratic governance as they recognize and 'capitalize' on the reality control of the means of production can translate to political power. And the jobs and local control that could be produced could weaken the populist, anti-globalization political forces as people recognize that they could benefit from the positive aspects of globalization and international cooperation and connectedness while diminishing the impact of globalization's downside such as jobs lost to outsourcing and dependence on foreign energy supplies.
There are powerful vested interests that stand to lose in such a global structural shift as we see in the Trump administration's efforts to serve the fossil fuel industry industry interests in rolling back regulations and purging climate science research from the federal government, for example. But this vision builds on trends already under way and gaining momentum as technology underpins the economics of the shift. 'Peak globalization' could be a viable pathway to creating an economic foundation for "putting people at the heart of the future" while building a more economically and environmentally sustainable future.
Banning Garrett, SOIF Colleague; Associate Faculty, Singularity University; Senior Fellow, Global Federation of Competitiveness Councils. The views expressed here are his own. This post first appeared on OpenDemocracy.