Thoughts on Civil Unrest
A few days ago I saw a protest march right past the apartment I am staying while I was walking home. From a people I asked, I learned they were factory workers on strike.
An elderly women walked up to the protestors, took the microphone, and started screaming something. I wish I spoke better Spanish to understand what she said! But from the crowds cries, it was supportive of their cause.
The policy slowly walked with the crowd with squad cars in front, officers on the side, and a riot van in the back. I think they were there to keep the protestors contained rather than protecting the protest. Let's just say they were there to maintain order.
I have heard on the news of strikes and civil unrest happening more frequently in Europe since the crisis.
The protest was made up primarily of young people, perhaps those who wanted and expected a better life. Prices for various good have increased recently while wages have been flat, or disappeared for the 25% of Spaniards who are unemployed. The man who's apartment I am living in has told me that a canister of gas for heating and cooking has increased from €14 to €18.50 over the past few years. I suspect for goods like gas and bus fare the increases are from a decrease in government subsidies.
There are many aspects to this issue. The government must bare some responsibility for all that has happening. From what I have learned in the Spain, the government operates in a fairly opaque manner. Both parties are funded by similar interests groups - the utilities, banks, and telecoms companies. I was told that some major politicians are hired as "consultants" by utilities companies and are paid as much as €450,000 a year for their "consultation". These sorts of practices are done by both major parties, and even if other parties emerge they are likely to be influenced by this same back room, political machinery.
The challenges for countries like Spain are particularly acute. In early decades, Spain's economic growth was fueled by low cost manufacturing. Some Spaniards think this will again be their future engine of growth, but as emerging market countries have come to dominate the low-cost manufacturing sector, developed and expensive countries like Spain cannot compete with countries like China or Vietnam. Manufacturing in developed countries consists primarily of high quality goods where labor costs make up a smaller percentage of the cost. However, higher quality goods are also often less labor intensive as much of the work is performed using machines. Moreover, developing a high quality goods manufacturing sector like Germany has with automobiles, takes years of consistent investment in infrastructure, education, and business friendly policies.
The thing that concerns me about develops in Spain and even in the United States deals with structural unemployment. In the last decade the link between wages and productivity in the US was broken. For the past century this connection was accepted as a given in economics, but changes in our economy has broken this link. This means that even as productivity increases, wages will not follow in step. In the US, since the economic crisis, 95% of all income gains have gone to the top 1%. As more jobs in our society can be performed more inexpensively and more effectively by machines, it makes it even more challenging to for people to find jobs.
Having a large fraction of the population out of work is not only a drag on the economy as they must be supported by the government, but it is also politically volatile and dangerous. A high level of young and education people out of work and/or discontented with their situation in life was the tinder that fueled the Arab Spring. I'm not saying the Arab Spring was bad in anyway, but simply that unemployment has a causal effect on civil unrest. If inequality and unemployment become structural, this potential for unrest could build in the US or other countries.
The general problem of unemployment and stagnate wages may not turn out to be structural, and may simply be a transitory behavior after an economic recession. However, I do fear that our society may be overlooking this issue by making the excuse that things will change once the economy picks up.
A few years ago, I read the book Player Piano which is one of among many books that describes a society separate into two groups: the few educated engineers who run the machines and the many uneducated poor that do menial jobs. I don't think we are anywhere near to a distopia, but if these labor issue prove to be structural and nothing is done to address these problems. The tranquil society we take for granted may unravel surprisingly quickly.
We will have more to worry about than manufacturers on strike.
