America's standard of living in the future

[Jacob Mathai]

My question: Will America's (USA) standard of living go up or down for the next generation?

For the first time in decades, I am wondering whether the next generation will have a lower standard of living. My observations are given below:

1. The prosperity of the 1990's (Clinton era) may not be duplicated in 2010's. The 1990's prosperity was propelled by the technology revolution (PC + Internet + Cell Phone). I am not seeing such job creating innovations now. Right now, businesses are trying to eliminate as many jos as possible to keep profits high.

2. The outsourcing is depleting job opportunities for 'white' and 'blue' collar jobs (pardon my categorization).

3. Computers are eliminating many jobs (Example: Clerical, Engineering jobs etc.) In auto plants, robots are doing welding, painting etc.

4. Health care is absorbing a bigger chunk of a family's income. Less money for buying goods and services.

5. Last several decades, America is more engaged in financial engineering than real engineering. The highest paid jobs are in Wall Street (salary + bonus). Remember the junk bonds they sold in 2006-2008 and the resulting problems all over the world. We are still trying to contain the financial crisis.

6. Deficits and pension fund liabilities will hurt many States in the coming decades. Politicians will do anything to make them look good when they are in office. The problem comes later (after they are out of office). Additionally, two wars have increased deficits.

7. Slowly we have moved from a manufacturing economy to a service economy. Can service economy create many new jobs to reduce the high level of unemployment?

But on the other hand, Americans are known for innovation and job creation. (We have landed men on the moon.) American infrastructure is great and is the envy of the world. Agricultural production is strong. We are still the leaders in computer technology (hardware + software + gadgets). We have overcome recessions in the past and prospered. This is still the land of opportunity. Millions all over the world would love to come and live here.

This is strictly a discussion on the standard of living of our next generation. Will it be up or down? Please refrain from extreme politics in your response.

 

[Adam Caramon]

My question: Will America's (USA) standard of living go up or down for the next generation?

I'd say down. Based on some of the things mentioned below, which have contributed to record levels of unemployment and the housing market collapse, I don't see us turning around for quite some time.

I think the key issue, however, is that no one can seem to agree on the what is causing the problems. As you have mentioned under #1, the 1990s were an era of prosperity, but why? Most people I know would say because Clinton was a great president, others say it is do to actions under previous presidents.

Our healthcare system is only great for those who can afford it; to all the countries that have already figured out that socialized medicine is the way to go, we're the laughing stock.

The widening gap between the poor and rich in this country is more evidence to me that we're heading in the wrong direction.


I think we're going to have to accept that we're on the way down as a country. Unless some serious changes are made, I think we will come to find that our greatest days were behind us.

 

[Rabbie]

My initial reaction was that the standard of living will steadily increase in the medium to long term. This has been the historical pattern of many many years and there does not seem to be any thing suggesting a complete collapse of the world system at present. Of course there will be variations from community to community but I am sure the general trend will be upwards.

However after more thought I am not so optimistic. If the global population continues to increase then sooner or later we will reach a crisis when this planet cannot support a runaway population explosion and who knows what will happen then

 

[Steve R.]

The quick answer DOWN.

Now to bifurcate the response. The direction of the standard of living depends on a variety of factors. Some factors that are "improving" the standard of living include: cheaper computers, cheaper appliances, and better quality cars. factors that are "decreasing" the standard of living include: increased housing costs, increased costs for attending college, increased energy costs.

Unfortunately the net effect, overtime, will be a decrease in our standard of living. Our (current) ersatz increased standard of living is actually the result of "supply side" economics that encouraged consumption before its time. Essentially, buying on credit before you have earned the money. Eventually the bill comes. The bill has figuratively arrived.

There is still more to be said concerning the pending decline in our standard of living. Japan/China can serve as an example. When a developing country first begins to manufacture products they are cheap in both quality and what the employees are paid. Overtime the products become more expensive do to improved quality and greater labor costs. Your cheap Chinese manufactured washing machine of today may become expensive tomorrow. Once cheap Japanese cars are no longer cheap.

Our future standard of living may also be (independently) "forced" down in response to a falling dollar.

 

[Steve R.]

2. The outsourcing is depleting job opportunities for 'white' and 'blue' collar jobs (pardon my categorization)

"Outsourcing" is a much vilified word that exposes the hypocrisy of many of those who claim to believe in the free market. Essentially, when a job or business is "outsourced" the worker/land/building has become too expensive. So if you are a free market person you move your business to the low cost solution.

5. Last several decades, America is more engaged in financial engineering than real engineering. The highest paid jobs are in Wall Street (salary + bonus). Remember the junk bonds they sold in 2006-2008 and the resulting problems all over the world. We are still trying to contain the financial crisis.

Financial engineering does not CREATE wealth - it is a transaction cost related to MOVING wealth. Sure Goldman Sachs may be making gobs of money, but it is making that money by stripping wealth from the underlying assets. It is NOT creating wealth.

Think of the realtor who sells houses. The realtor may earn a commission for selling the house but the value of the house does not increase by the amount of the commission. Technically, the realtor has actually devalued the house by the amount of the commission. (Note-This housing devaluation has been hidden by cheap credit to encourage people to buy houses that artificially inflated the value of housing)