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Yglesias’s labor supply theory of retirement

February 9, 2013

Prominent economic blogger Matthew Yglesias, as should be expected with a blog entitled “Moneybox”, gets thoroughly lost in a labyrinth of financial mirrors in a recent post Immigration Is The Only Viable Retirement Plan”.  He claims that “demographic shifts doom all retirement schemes” and that we’re all “doomed” if the rate of population growth declines.  This is because there will be fewer people to pay social security taxes or to buy whatever financial assets a retiree may have been lucky enough to accumulate.

Yglesias claims that to retire decently, each of us must “stockpile a bunch of extra stuff that you can trade for labor in the future”.  The “stuff” is basically financial assets and he tells us that it’s critical the supply of labor keeps growing in order for there to be someone to buy the assets when the time comes to make the trade.

But this is nothing but a ponzi scheme and his paradigm only makes sense in the completely warped ontology of a purely individualized capitalism.  What’s missing in his analysis is the critical fact that we as a society have never been more productive and there are huge masses of people desperately seeking to provide their labor.

What would happen, we should ask, if we suppose a worst case scenario and no one is able to “stockpile” sufficient assets to trade for future labor.  Well, within the logic of capitalism, not only would our parents and grandparents live miserably, the entire workforce devoted to caring for them would collapse and that would encompass not only hospitals and the medical industry but very many regular jobs involving the food supply, restaurants, tourism, clothing, etc.  Anthropologists of the future would look back in amazement that the most productive society ever to exist on the face of the earth collapsed because they weren’t able to stockpile sufficient assets to trade for human labor.  How incredible: an entire society collapses because it couldn’t afford to pay for itself!  This is the financial “moneybox” world Yglesias seems to take as a given.

And it’s not of course just Yglesias, the fundamental world view is duplicated by nearly all economic writers in the vast sterile desert between the center-left and the far right.  They endlessly cite potential problems which have absolutely no relevance  in a highly productive world where there’s no labor shortage and the crucial problem is exactly the opposite – how to find employment opportunities for the vast numbers of un / under employed.  We have an entire industry dedicated to manufacturing crises out of the false world of finance.  And only from that world can Yglesias’s conclusion make any sense at all: “The only viable option, then, is to import adult human beings—immigrants—who’ll want houses to live in, who will expand the labor supply, and who will expand the demand for capital goods.”

2 Comments
  1. Vincent permalink

    “The only viable option, then, is to import adult human beings—immigrants—who’ll want houses to live in, who will expand the labor supply, and who will expand the demand for capital goods.”

    This can only be true in a world of exponential growth with no environmental impact on the planet, and an endless supply of limit resources, which is, of course, impossible. But delusion is much more satisfying. Growth is the mantra of the day.

    Assuming growth resumes to its historical long run average of 3.2%, does anyone seriously factor in the doubling of the economy in only 22 years? Just considering the number of new cars on the road makes me shutter. We’ve run out of time for any new technological breakthroughs, which might diminish its environmental impact.

    Already, some climate scientists conclude we have past the point of no return with the greatest peril being severe draught across the globe causing famine. Without a new paradigm, we’re all screwed. Or at least the very poor, who will also face displacement from rising tides.

    With mass concentrations of wealth influencing political power to maintain their grip on the status quo, any change, I fear, can only come after the proverbial hits the fan.

    Yes, we’re all doomed, but for another reason.

  2. Hi Vincent,

    As you say, “without a new paradigm, we’re all screwed”. The outlook for our species surviving is pretty dim when apparently respected commentators can seriously proclaim something as downright silly as the opening quote in your comment. But I suppose no one can ever make real sense as long as he / she is locked inside the “moneybox”.

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