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Tuesday, April 25, 2017

Adding Up the Cuts in the Vetoed FY 2018 Budget. [feedly]

Adding Up the Cuts in the Vetoed FY 2018 Budget.
http://www.wvpolicy.org/adding-up-the-cuts-in-the-vetoed-fy-2018-budget/

The budget bill passed by the legislature on the last night of the session and later vetoed by the governor balanced the state's $497 million budget gap by taking $90 million from the Rainy Day Fund and cutting General Revenue appropriations by $402.6 million below the governor's proposal. The governor's FY 2018 proposal had originally increased General Revenue appropriations by $317.9 million above FY 2017's level, meaning that the FY 2018 budget that was vetoed by the governor had represented a $84.6 million cut in General Revenue from FY 2017. Here are where the legislature's budget made those cuts.

Education
The FY 2018 budget cuts $17.2 million from the State Department of Education. These cuts including eliminating state funding for the Regional Education Service Agencies (-$3.5 million),  Innovation in Education zones (-$2.5 million), and 21st Century Community Learning Centers (-$1.7 million).

For State Aid for Schools, the state's share of school funding decreases by $24.8 million compared to FY 2017, while the local share also decreases by $12.5 million, netting the state a $12.1 million decrease in total basic state aid for schools. Overall, State Aid for Schools increased by $17.1 million over FY 2017, with increases in retirement systems payments causing the increase.

Education and the Arts
General Revenue appropriations for Education and the Arts are cut by $1.7 million in the FY 2018 budget compared to FY 2017. The cuts include a $1 million cut to the Education Broadcasting Authority, whose funding was fully eliminated in the governor's proposed budget.

Health and Human Services
The FY 2018 budget cuts $49.0 million from DHHR, with most of the cuts coming from General Revenue appropriations for Medicaid. The FY 2018 budget cuts $46 million from Medicaid's General Revenue appropriations compared to FY 2017, but replaces the cut with transfers from the Rainy Day Fund and increased Lottery fund appropriations. However, funding for Medicaid remains $56.3 million below the governor's FY 2018 proposal.

Other cuts to DHHR include eliminating state funding for the CARDIAC Project (-$427,500), the Center for End of Life Care (-$420,198), the Healthy Lifestyles Coalition (-$147,034), the Osteoporosis and Arthritis Program (-$158,530), the Tobacco Education Program (-$3.0 million), and the WV Women's Commission (-$156,408).

Military Affairs and Public Safety
The FY 2018 budget cuts $1.6 million from DMAPS compared to FY 2017. Appropriations for the State Police are increased by $7.7 million, while appropriations for correctional facilities are cut by $7.9 million. Other cuts to DMAPS total $1.4 million.

Higher Education
The FY 2018 budget cuts Higher Education by $30.7 million, including $26.6 million in cuts to 4 year colleges and universities, $1.8 million in cuts to the HEPC, including eliminating funding for WVNET, $2.2 million in cuts to community and technical colleges, and an $156,816 cut to the Council for Community and Technical Colleges.

Other Cuts
Other cuts in the FY 2018 budget include $2.1 million in cuts to executive branch agencies (Governor's Office, Auditor, Treasurer, Agriculture, Conservation Agency, Attorney General, Secretary of State, State Election Commission), $533,302 in cuts to the Department of Administration, $4.3 million in cuts to the Department of Commerce, $172,064 in cuts to the Department of Environmental Protection, $653,287 in cuts to the Department of Revenue, $355,709 in cuts to the Department of Transportation, $143,508 in cuts to the Department of Veterans' Assistance, and $733,387 in cuts to the Bureau of Senior Services.


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Dynamic scoring, interest rates, and “crowd out” [feedly]

Dynamic scoring, interest rates, and "crowd out"
http://jaredbernsteinblog.com/dynamic-scoring-int-rates/

I've got a piece over at the WaPo on why, when Treasury Sec'y Mnuchin says that Trump's tax plan–which I suspect does not exist yet outside of some broad principles–"will pay for itself," you should…um…disbelieve him.

 

Such claims abuse "dynamic scoring," the process by which analysts estimate macroeconomic feedback effects from tax cuts. I provide a number of reasons why dynamic scoring abuse–DSA, or claims that tax cuts get anywhere close to paying for themselves–is a serious disease:

—The Tax Policy Center, known for careful, state-of-the-art analysis, finds that one recent version of the Trump tax-cut plan lost $6.15 trillion in revenue over 10 years without dynamic scoring and between $5.97 or $6.03 trillion with it. For the record, I don't believe these either, but at least I can understand the assumptions and these are not abusive scores.

—The reason I don't believe them is because I don't think we (economists) can accurately even "get the sign right" on such estimates, meaning we can't tell whether they'll add to or subtract from growth. All we can know, based on history, is that they'll be "small," à la the Tax Policy Center effects just cited.

—How can this be? Isn't it always the case that tax cuts boost growth? No! There's no such correlation either across countries or across time. Team DSA argues, for example, that tax cuts will lead people to work harder, but economic theory is ambiguous on this point, as some people will maintain their same after-tax income while working less. And, of course, most people can't tweak their work schedules like this anyway when the tax code changes.

—That's microeconomics, but at the macro level, if the revenue loss means less investment in public goods, including both productivity-boosting physical and human capital, growth will be slower.

 —Because of all this uncertainty, dynamic scoring, if done honestly, generates a wide range of estimates, depending on the different assumptions plugged into the model. For example, a dynamic score of a Republican tax plan from a few years ago by former Rep. Dave Camp estimated that it would raise the level of GDP over 10 years by between nothing (0.1 percent) and 1.6 percent.

—Now, guess which end of that spectrum fans of his plan would choose to highlight(see figure below)? Recall how Trump "dynamically scored" the crowd size at his inauguration or the popular vote count from the election. Given a range of dynamic scores, do you trust this team to give an honest answer? In fact, Mnuchin's already teed up his answer: The tax cuts will pay for themselves.

At least one person (OK, exactly one person) has asked me why, in arguing against large growth effects of tax cuts, I left off the impact of higher budget deficits and debt. In conventional models, they lead to higher interest rates and thus lower growth.

I left this off because I believe economists have an increasingly limited understanding of this relationship. To be clear, that's not the same as saying that larger deficits and debt will never crowd out private borrowing and raise rates, which in turn slow growth. It's saying there are numerous links in that chain, and intervening developments for which we must account.

EG, the Federal Reserve is clearly in the mix. The figure below plots the deficit/GDP against the composite nominal interest rate on gov't debt and the Fed funds rate (most of these data come from Kogan et al; I added the funds rate which is on fiscal, not calendar year basis–doesn't matter).

Soruce: Kogan et al

In the first few decades of the figure, the deficit/GDP ratio drifts down and the interest rate drifts up, as per the conventional model! Except that towards the end of the series, the deficit gets a lot more negative and so do interest rates. In fact, the interest rate tracks the Fed Funds rate a lot closer than the budget deficit.

You can plug in the real rate, try lags, whatever–the correlation's not there. The deep recession led to large deficits and very low interest rates, the latter a function of stimulative monetary policy. Forecasters and deficit hawks kept warning that any day, the bond market would punish our profligacy and interest rates would rise, but as the figure below shows, they were repeatedly wrong.

Source: Obama CEA

The historical record doesn't help either. Using Kogan's data, the correlation between the interest rate and the deficit since 1792 (!) is 0.12, i.e., small and the wrong sign. Using the real rate, it's 0.30. Using changes (in the nominal rate) it's 0.17. Using a more recent sample (1970-2016), the correlation is 0.10; using the real rate, it's at least negative, but at -0.04, far from statistically significant.

These are not models, of course–just correlations. But let me put it this way: given the extent to which much deficit hawkery references "crowd out" effects, the evidence for that dynamic doesn't jump out of the data, to say the least, which is why I didn't include it in the WaPo post.

Finally, I liked economist Jason Furman's discussion of these issues under the rubric of "fiscal space" in his recent piece on the "new view" for fiscal policy. First, he notes that the sovereign debt crisis was not obviously deficit driven: "there is no correlation between countries whose debt-to-GDP ratio rose prior to the crisis and those that saw their sovereign spreads spike during 2011. The spikes in debt in places like Ireland and Spain were far more a result of the crisis than a cause."

When fiscal multipliers are robust, say in weak growth periods when the Fed will accommodate fiscal expansion (implying a low interest rate environment), deficit spending that boosts growth can lower the debt/GDP ratio, the opposite of the "crowd out" story.

I've argued in various places that capital flows are in play here as well. As other countries buy safe US assets (like Treasuries), or, for that matter, any US financial assets, from securities to dollars, that too contributes to low interest rates and thwarts the simple crowd-out story.

Still, I wouldn't wholly discount the connection between higher public indebtedness, higher interest rates, and slower growth. I wouldn't, as I believe the Tax Foundation does in their dynamic scores, simply assume away this connection.

We just don't know, which, at the end of the day, underscores my broader point here, which is: I have little faith in dynamic scores to start with, and zero, nada, zip, no faith at all in claims that tax cuts pay for themselves. That's DSA, plain and simple.


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NYTimes.com: Middle Class Contracted in U.S. Over 2 Decades, Study Finds

 
Sent by jcase4218@gmail.com:

Middle Class Contracted in U.S. Over 2 Decades, Study Finds

By NELSON D. SCHWARTZ

The United States had fewer middle-income earners and more at the extremes than any of 11 Western European countries in a Pew Research Center report.

Or, copy and paste this URL into your browser: https://www.nytimes.com/2017/04/24/business/economy/middle-class-united-states-europe-pew.html?emc=eta1
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Copyright 2017 | The New York Times Company | NYTimes.com 620 Eighth Avenue New York, NY 10018

 

AAAS: The fading American dream: Economic mobility has nearly halved since 1940

The fading American dream: Economic mobility has nearly halved since 1940

AMERICAN ASSOCIATION FOR THE ADVANCEMENT OF SCIENCE


The probability for children to attain a higher income than their parents has dropped dramatically - from more than 90% for children born in 1940 to 50% for children born in the 1980s - according to a new study analyzing U.S. data. Results reveal that restoring economic mobility would require, in part, more equal economic redistribution. The "American Dream" promises that hard work and opportunity will lead to a better life, and that even those born to low-income families can "rise above the ranks" with sufficient effort. Despite much interest in economic mobility, however, studying it over generations remains challenging, mainly because of the lack of large, high-quality datasets in the U.S. linking children to their parents. To overcome these gaps in data, Raj Chetty et al. took a sophisticated approach that combines data from United States Census and Current Population Survey with tax records, adjusting for inflation and other confounding variables. They found that the fraction of children earning more than their parents fell from 92% in the 1940 birth cohort to 50% in the 1984 birth cohort. Economic mobility fell most sharply in the industrial Midwest (e.g., Indiana, Illinois), while the smallest declines occurred in states such as Massachusetts, New York, and Montana. One possible explanation would be that the GDP growth rate has declined over more recent decades; yet when the researchers modelled the 1980s cohort with the same GDP growth rate seen in the 1940s, absolute mobility only rose from 50% to 62%. In contrast, when the researchers modelled the 1980s cohort with the same economic distribution seen in the 1940s, the rate of absolute mobility rose to 80%. Together, these simulations show that increasing GDP growth without changing the current distribution of growth would only have modest effects on rates of absolute mobility, the authors say.

In a related Policy Forum, Lawrence F. Katz and Alan B. Krueger discuss the results from Chetty et al., elaborating on policies and actions that can be taken to achieve greater economic redistribution. In essence, they characterize five classes of policy interventions to consider: fostering faster productivity growth, raising human capital, raising wages and employment of low-income households, updating taxes and transfers, and making place-based policies to address geographic mobility. They provide numerous examples of how to achieve each of these goals, including but not limited to: offering universal preschool; improving recruitment, retention, and professional development of teachers; offering greater access to public universities; increasing the minimum wage; increasing the generosity of the Earned Income Tax Credit overall, but particularly for low-income workers without dependent children; and expanding access to housing vouchers for low-income families with young children.


--
John Case
Harpers Ferry, WV

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Stiglitz on the welfare state

A cogent defense of social democratic "welfare state" economic theory and policy.

Paul Krugman: Zombies of Voodoo Economics [feedly]

Paul Krugman: Zombies of Voodoo Economics
http://economistsview.typepad.com/economistsview/2017/04/paul-krugman-zombies-of-voodoo-economics.html

 "Because it offers a rationale for lower taxes on the wealthy":

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?

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Monday, April 24, 2017

‘Peak Globalization’ and the Future of Democracy [feedly]

'Peak Globalization' and the Future of Democracy

http://www.globalpolicyjournal.com/blog/24/04/2017/%E2%80%98peak-globalization%E2%80%99-and-future-democracy

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'[1] 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.[2]

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).[3] Mobile broadband subscriptions had reached 4.3 billion by the end of 2016, according to Ericsson[4] (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. 

New technologies

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,[5] 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.

3D printing

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.

 


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