Atendendo a algumas respostas apreciativas e inúmeras ignorativas, aqui está......

13 setembro 2011

Rabbits in New England

A very fundamental change seems to have happened to the United States in the last quarter century. The United States is no longer a high labor cost country. I'm sure some economist has written about this change, but it is not part of public debate.

First let me clarify what I mean. Labor in a few countries has been more expensive than the US for a while, and many countries still have much lower labor costs. However a defining trait of US economy and society has ALWAYS - I mean since the early colonial times in the 17th century - been the fact that labor was scarce and expensive. Any labor saving device was welcome, any extra capital or land welcome. 

The reason why labor was scarce in the US has to be found in the lower population densities of the original peoples, and especially in the populational collapse that started even before the first European colonies were established in North America. Without getting into a cause-and-effect argument, we can relate to the scarcity of labor and to abundance of natural resources many aspects of US history which we tend to think as having cultural, institutional, or sociological roots: openness to immigration, the fierce defense of slavery by plantation owners, class mobility, less pronounced class divisions than pretty much anywhere else in the world, the lack of permanent elites, universal public education already in the 19th century, yankee ingenuity for sure, perhaps even the relatively open political system.

The US no longer leads the world in labor scarcity and cost. How do we know that, without looking into detailed statistics? Toll collectors in highways. Restaurant staff and caterers at private events. Tram conductors. Compare, not to Europe, whose labor costs have surpassed American ones a while ago, nor to booming China - in fact the rapid pace of change in China may obscure the fact that something is happening in the US - but to Brazil. A few years ago, the least part of the cost of anything in Brazil was personnel. Domestic workers were the norm in any middle class home. Now it seems to me that the supply of labor, if not the actual hourly rate, is more constrained in Brazil than in the US. I'll let a good econometrist dig the data, but organizing a bat mitzvah party in Brazil one month after one in the US has made the change very clear to me. Believe me, I have been commuting between Brazil and the US for almost 25 years. The lack of progress in the US is not as obvious as the changes in Brazil, but it is no less real.

Why has this happened? Several factors come to mind. Immigration and populational growth have made resources comparatively less abundant. Education progress has slowed down significantly in the last quarter century. Infrastructure is dated and in bad state of repair, and has become a drag on productivity. Government policies and the tax code have been changed against workers and to benefit the rich. Technological changes and globalization have favored concentration of wealth. Cheap manufacturing abroad has diminished the need for workers.

What has been the impact of lower labor costs in the country? A few suggestions, in a somewhat circular feedback loop. The improvement of mass education has become less of a priority. Investment in infrastructure seems less urgent. Class divisions are more pronounced. The wealthy have acquired a disproportional control over the political process. Political ideologies follow more closely the interests of the rich. More efficient production is no longer the route to business success, and scientific knowledge and research has lost status and has less impact. The ruling classes have lost some of their traditional patriotism, and are happy to have the children of the poor fight their wars.

It looks like a vicious cycle.

On another anecdote, rabbits seem to have become easier to find in New England. I had thought that basically one saw rabbits in Philadelphia and squirrels in Boston. A sign of climate change?
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