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| Silicon Valley economists want to use unrealistic measurements of productivity. |
When you study economics, there is one thing that all the courses drive home: in order for an economy to exist, people have to be exchanging goods and services. That is what economics is all about. You can talk about macroeconomics, microeconomics, price elasticity, too many dollars chasing too few goods, but at the heart of it all is people: people working at jobs, using their salaries to buy goods and services from each other. Google economist Hal Varian doesn't get that.
To read about the guy you would think he was some kind of genius or something. He works at Google so they must think he is pretty smart. But how is it that he missed the basic premise of the theory of economics: that people have to be able to exchange goods and services?
Here is what set off the alarm klaxons in the halls of economics: Silicon Valley (all those tech companies turning out Internet millionaires) wants to toss out the metrics we use to measure "productivity". Hal Varian is leading the charge to hide the dirty numbers under the carpet. He says: “There is a lack of appreciation for what’s happening in Silicon Valley because we don’t have a good way to measure it.”
Oh, I think people appreciate what is happening in Silicon Valley all right: it's a slow process that takes jobs away from Americans in other parts of the country and gives them to imported technologists from other countries. Now these may be very good people who just want to make a living, but after 10-15 years their skill sets are no longer what Silicon Valley needs, so if they haven't made their millions they are sent packing while they are replaced by newer, younger workers from overseas.
This country does not have an illegal immigrant problem. Contrary to what that nutcase Donald Trump would have everyone believe, illegal immigration has been declining for years. The trend that began in the mid-2000s was still going strong in 2013. As recently as late 2014 studies have shown that illegal immigration continues to drop. The problem with illegal immigration has not been solved but it is approaching solution status.
Meanwhile, hundreds of tech companies are demanding that the government hand out yet more H1B visas to foreign recruits. We already have millions of people in this country who have experience in all areas of the technology industry. They just need more training to tool up for new job requirements. So why aren't the technology companies investing more in putting people who are already here to work?
The problem is with the mentality of these tech giants and the venture capitalists (many of whom came out of the technology industry) think: people are just a means to an end. The end is "greater efficiency". Take Steve Jurvetson, for example. This creative genius says "we only invest in businesses that reduce labor". That's right, his venture capital firm only wants to take jobs away from Americans (and anyone else who gets in the way of their profits).
These guys don't see any problem with productivity because it's too expensive for the unemployed to live in or near Silicon Valley. When you lose your job there you move away and become someone else's problem. People like Carl Icahn make hundreds of millions of dollars by buying strong positions in companies that they whittle down to improve the stock price.
How do you improve the stock price of a company? You reduce expenses, increase sales, or eliminate waste and inefficiencies. Most companies cannot increase sales enough to improve their profits. Their stock prices don't go up on profits alone. So that means anyone who is on Carl Icahn's short leash has to cut costs, and the fastest (and most dramatic) way to cut costs is to cut payroll.
You can cut payroll in two ways: lay people off or sell off less profitable parts of the company. Icahn and his cronies don't care who suffers as long as they make millions of dollars. So all that high productivity that the Silicon Valley people see every day when they go in to work at their offices comes at a steep price in human lifestyle changes. You cannot cut jobs without hurting people.
Hal Varian has been eating the free food at Google for so long he obviously hasn't gotten out to see how the other 90% of Americans have to work for food and to pay their rent or mortgage. But while we can heap loads of criticism on his ivory tower economics, the real problem here is that technology is destroying the economy that provides over 100 million Americans with jobs. We all want to work at home and be served by cool smart gadgets, self-driving cars, and robots, but at the rate Google and other technology companies are destroying jobs, those luxuries will only ever be enjoyed by a few people.
The answer to this problem is not to turn our backs on technology. No, the answer is to think of ways to create new jobs. Venture capitalists and investment fund managers who only think about cutting costs will eventually run out of "fat" to eliminate. What they should be doing is investing in job creation and growth, because if they don't do that then only the government will be in a position to hire all those people.
Maybe we can start some new infrastructure projects to put a few million people back to work for 5-to-10 years, but that won't happen as long as we have Republicans controlling Congress. They believe in "less government" while their rich Silicon Valley buddies believe in "fewer jobs". That killer combination is the reason why millions of Americans now earn less, work fewer hours, and are "more productive". The Republican Party and the Silicon Valley economists have all but wiped out a generation of economic growth, and they are about to bury another generation's economic future.
The good news for students in India, of course, is that more of them will find jobs in America because times are booming here.
