Schumpeterian Creative Destruction

[rboyd]

Schumpeter was an economist who pushed the notion of "creative destruction" where new technologies render old ones obsolete, and therefore destroy the value of assets based upon those old technologies.

https://en.wikipedia.org/wiki/Creative_destruction

Classic examples are the refrigerator and the ice industry, cars and horse-drawn carriages, CD's and vinyl records etc.

When I look at the technological shift required to move to a low carbon economy, the scope of creative destruction is quite enormous and may happen in a relatively short time (perhaps a decade). The financial impact may easily devastate the economy. Some examples:

- Electric cars (and trucks) destroying the oil industry, large swathes of the automobile industry (including auto and truck leasing and finance) and many people's second biggest asset (their ICE car). Self-driving abilities just add to the devastation.
- The writing off of the non-depreciated value of coal, gas and nuclear power assets.
- Enforced limitation of CO2 emissions could cripple the aviation industry, and with it large segments of the tourist industries (including the economies of many tourist locations).

Then climate change itself could cause severe financial dislocation
- Real estate developments anywhere near sea level may rapidly lose value, causing loan defaults that affect bank solvency.
- If some of the forecasts for intensifying droughts in places like the south-west are true, the same could happen to real estate there.

There may be pockets of relative prosperity, but the impacts of structural unemployment, financial failures etc. may greatly limit the gains made by "winners", at least in the short-term. It does look like we have waited so long that we may be impacted badly by both the speed of the required transition, and increasing climate change impacts at the same time.

As in the 1930's, the need for government action may be critical in stabilizing the economy during the transition period. I feel that a separate thread for this is required as this issue will become more evident as the renewable technologies are at/very close to the cost cross-over point of the S-curve. In addition, any abrupt climate change (e.g. blue ocean Arctic) may trigger a significant change in social and economic attitudes to climate change.

[Sigmetnow]

The road through the next decade or two will be bumpy, indeed!  Our comfort (or, survival) will depend on what shock absorbers we install....

[Bob Wallace]

We've got a choice:

1)  Moderate pain
2)  Extreme pain.

[gerontocrat]

There are recent examples of large-scale destruction of national and regional economies - e.g.s following the collapse of the Warsaw Pact, and the destruction of 80% of the industrial base of former Yugoslavia due to the civil war.

However, you will find it hard to find the story of how the majority of the population suffered and adapted, simply because media reporting was mainly confined to happenings in the capitals.

It is fair to say that if you look beyond the glass palaces in the richer quarter of Moscow, or to the eastern border of Latvia away from the capital Riga you will likely find that for most people, life is still pretty tough and is not better than before the upheavals.

We are not just talking about stranded assets, we are talking about stranded people. The people we choose to govern us haven't even looked at the trailer, and may well have only walk-on parts in the main event.

[TerryM]

Creative destruction or destructive deflation?


War from above seems have been the prefered mode of destruction since the horse trotted off the global stage. Recently however, the only rebuilding has been by the MIC as they build newer, more expensive machines designed to convert housing, manufacturing, and commerce into dust.


Rebuilding Berlin, where even cobblestones needed to be replaced with the compacted dust used in concrete pavers, was a milestone in destruction, only to be rapidly surpassed by Tokyo, Hiroshima and Nagasaki. They claim that when the general responsible for North Korea's carpet bombings finally set foot on land he threw up at the realization of what he had done.


I'm not sure our side has learned much about rebuilding since Mrs O'Leary's cow went on an incendiary rampage.


Lately they haven't been holding up their end of the bargain. Instead of taking out high interest loans and industriously rebuilding, they've taken to immigrating to somewhere where we're less likely to bomb them.
How does this help our ailing banking sector? Who will buy our bulldozers when everyone just fades away?


Perhaps destruction of our own economy via EV's is the sensible way forward. Bombing sand into ever tinier grains of sand just doesn't seem to be working.
Terry

[Bob Wallace]

EVs are not going to destroy our economies. 

Some countries will be badly hurt - those who largely rely on oil for national income. 

Some countries will benefit - those who currently spend significant money importing petroleum.

Some industries will be badly hurt - specifically the oil industry.

Some industries will benefit - solar and wind, in particular.

Some industries and occupations will be damaged by robo-vehicles - the car industry, taxi and truck drivers.

Some people will benefit - everyone who will be able to go where they are going for less money and spend less for what they want to purchase due to cheaper shipping.  Add in a close to total elimination of crash related deaths and injuries.

It's a mixed bag.  Long term a vast improvement for almost all with some losing money or occupation during the transition.

[Sigmetnow]

...

It's a mixed bag.  Long term a vast improvement for almost all with some losing money or occupation during the transition.

And a universal income will be seen as the only logical next step, as robotics and automation eliminate millions of jobs.

[johnm33]

A universal income would still mean borrowing from the banks to pay for it, since they create the money out of thin air, better to lend the money, created out of thin air, direct to each citizen from the state. Then of course since profits are optional and move as freely as the wind best institute a simple transaction tax suitable for each sovereign state on every transfer of money/credit. Then you'd see some creative destruction.

[Bob Wallace]

A universal income would still mean borrowing from the banks to pay for it, since they create the money out of thin air, better to lend the money, created out of thin air, direct to each citizen from the state. Then of course since profits are optional and move as freely as the wind best institute a simple transaction tax suitable for each sovereign state on every transfer of money/credit. Then you'd see some creative destruction.

There's nothing that says that a universal income would need to be borrowed.  Some portion of the tax from some (including corporations) would be used to provide income  for those who earn below the limit.  It's a negative income tax for all.

[pileus]

We’ve certainly underplanned/underprepared for the ever increasing impacts and disruption from global warning, and we are certainly underplanned/underprepared for the process of transitioning to carbon-free energy and the resulting disruption.

We also need to keep in mind that while this is happening to the carbon-intensive industries and workers, AI and robotics will be simultaneously decimating many other industries and occupations that have little to do with fossil fuels.

We’re not ready for this, but it’s sort of irrelevant because it’s unstoppable at this point.  As usual the poor and marginalized among us will suffer the most, but this also promises to pull vast numbers of people across all social stratification into life altering disruption, many of whom are right now completely unaware of what is coming.

[Bob Wallace]

Do humans ever plan for upcoming changes or do we, generally, just react as the change washes over us?

[johnm33]

Bob Wallace
"There's nothing that says that a universal income would need to be borrowed.  Some portion of the tax from some (including corporations) would be used to provide income  for those who earn below the limit.  It's a negative income tax for all."
You then place another burden on the real productive economy, which will be resisted by the near poor who are the backbone of that economy. 40% of current taxes already go to service gov. debt, by extending to everyone credit on the same terms that the .001% enjoy then you could think of paying down that burden, whilst maintaining a sufficient money supply to oil the economic wheels, incidentally completely realigning all economic imperatives by reducing both the debt and tax burden on home produced goods.

[Hefaistos]

We've got a choice:

1)  Moderate pain
2)  Extreme pain.

It's an inter-generational choice as well.
No pain for us.
Very little pain for our kids.
Extreme pain for grandkids and following generations.

Not so creative destruction of future generations.

[gerontocrat]

It's an inter-generational choice as well.
No pain for us.
Very little pain for our kids.
Extreme pain for grandkids and following generations.

Not so creative destruction of future generations.

You are very optimistic.  The current cocktail of climate change, deforestation, desertification of the land and the oceans, and loss of biodiversity (variety of species and population of individual species) means, I think, pain is not that far away.

[Bob Wallace]

We've got a choice:

1)  Moderate pain
2)  Extreme pain.

It's an inter-generational choice as well.
No pain for us.
Very little pain for our kids.
Extreme pain for grandkids and following generations.

Not so creative destruction of future generations.

We are experiencing pain right now.  It will continue to get worse.

Someone has turned on the burner, froggy.

[Bob Wallace]

Bob Wallace
"There's nothing that says that a universal income would need to be borrowed.  Some portion of the tax from some (including corporations) would be used to provide income  for those who earn below the limit.  It's a negative income tax for all."

You then place another burden on the real productive economy, which will be resisted by the near poor who are the backbone of that economy. 40% of current taxes already go to service gov. debt, by extending to everyone credit on the same terms that the .001% enjoy then you could think of paying down that burden, whilst maintaining a sufficient money supply to oil the economic wheels, incidentally completely realigning all economic imperatives by reducing both the debt and tax burden on home produced goods.

We have a very real problem forming.  We will need less and less labor over time.  For example, self-driving vehicles will eliminate taxi and truck drivers.  Robotic order pickers will replace humans in Amazon type warehouses.  Self-checking is eliminating clerk positions is retail stores.  This trend will accelerate.

Our option is to find a way to allow the unneeded people to live decent lives or create cardboard and plastic tarp slums where many of us attempt to scrape by. 

If you've got a better idea than a guaranteed basic income then tell us about it.

If you're happy with millions of Americans living in abject poverty I'd rather hear nothing more from you.

[Alexander555]

Bob Wallace
"There's nothing that says that a universal income would need to be borrowed.  Some portion of the tax from some (including corporations) would be used to provide income  for those who earn below the limit.  It's a negative income tax for all."

You then place another burden on the real productive economy, which will be resisted by the near poor who are the backbone of that economy. 40% of current taxes already go to service gov. debt, by extending to everyone credit on the same terms that the .001% enjoy then you could think of paying down that burden, whilst maintaining a sufficient money supply to oil the economic wheels, incidentally completely realigning all economic imperatives by reducing both the debt and tax burden on home produced goods.

We have a very real problem forming.  We will need less and less labor over time.  For example, self-driving vehicles will eliminate taxi and truck drivers.  Robotic order pickers will replace humans in Amazon type warehouses.  Self-checking is eliminating clerk positions is retail stores.  This trend will accelerate.

Our option is to find a way to allow the unneeded people to live decent lives or create cardboard and plastic tarp slums where many of us attempt to scrape by. 

If you've got a better idea than a guaranteed basic income then tell us about it.

If you're happy with millions of Americans living in abject poverty I'd rather hear nothing more from you.

To be honestly, i don't think we are going to see many autonomous driving cars or trucks. If you see how many riots Uber created all across the planet. And that were just the traditional taxi drivers. In the future it's going to be many more. I don't think it will be very save in a autonomous driving taxi. Or it has to be a driving bunker.

[Bob Wallace]

i don't think we are going to see many autonomous driving cars or trucks

Then I think you are not paying attention to what is happening. 

GM is planning on releasing a self-driving car next year.  GM has partial ownership of Lyft.  If nothing unexpected happens look for people to be riding in GM/Lyft robotaxis in selected markets within two years.

Self-driving taxis will be vastly cheaper per mile than driven taxis.  There will be a rush by traditional car manufacturers to get into the robotaxi business or else face extinction.

[johnm33]

B.W. "If you're happy with millions of Americans living in abject poverty I'd rather hear nothing more from you."
Actually totally the opposite, i'd like to see every citizen given access to credit at the same %rate as the very rich. To kick start your domestic economy might mean an advance of $50,000 followed by a monthly credit in each account, with the proviso that if you have any debt the first payment goes towards paying that down. The monthly credit could be the same as a proposed universal income and should be enough to both sustain and set people free from debt bondage, and free to find new ways to serve their fellow citizens as old style jobs dissapear.
 Your economy like ours [UK] is drowning in debt, 40% of taxes go to service debt and 40% of the cost of our purchases go in upstream interest charges, for anyone paying a mortgage debt slave is an apt term, for those paying rent there's no light at the end of the tunnel. For the poorest here a payday loan can cost +/- 1,300% but that's only for the lucky few who meet all their payments, missed payment charges can make these loans really expensive. https://www.quickquid.co.uk/ lendingstream
 So i'd be very happy to see a universal guaranteed income, i just think universal credit would be better.

[Alexander555]

i don't think we are going to see many autonomous driving cars or trucks

Then I think you are not paying attention to what is happening. 

GM is planning on releasing a self-driving car next year.  GM has partial ownership of Lyft.  If nothing unexpected happens look for people to be riding in GM/Lyft robotaxis in selected markets within two years.

Self-driving taxis will be vastly cheaper per mile than driven taxis.  There will be a rush by traditional car manufacturers to get into the robotaxi business or else face extinction.

I think it's going to be interesting to see that evaluating.

[TerryM]

With AI, and robotics I can't think of any job classification that has an assured future, except perhaps for illegal trades. Safe crackers, purse snatchers, and purveyors of illegal substances or services should always be able to eek out an ever more dangerous living.
Think about your present employment, then ponder how much better a never ill, never forgetful, never distracted machine could perform your duties.


What we need in coming days is a way to so greatly expand the idle rich, that they combine with the newly created idle middle class as well as the idle poor.


Once a method of payment is decided on, we then need a way to keep these demographics separated. The idle rich certainly don't want to share their haunts with the idle middle class, and neither of these share interests with the bums at the bottom of the ladder.


How can we equitable finance these groups, none of whom contribute toward society as a whole, in a fair manner that retains the class distinctions that so clearly cut through all of our societies?


Terry

[Sigmetnow]

...

How can we equitable finance these groups, none of whom contribute toward society as a whole, in a fair manner that retains the class distinctions that so clearly cut through all of our societies?


Terry

Those that have one, take one. Those that have two, turn one in. 

[TerryM]

Education, in a not to far future, without the need for human intervention, will need a complete overhaul.


If being educated to fulfil some positive service for your fellow man, or to increase your own income potential, loses not just it's luster, but it's entire raison d'etre, then do we send our little Johnnies and Janes off to learn advanced leisure appreciation, sexual gratification 101, or how to avoid run on sentence structure?


Why teach a child arithmetic, or reading, when a Bot's App will take care of all of that?


When all the Teaching Bots stand idle, will the Theobots take up the slack? What wondrous fantasies will AI weave to keep the religiously inclined entertained? Oz, with a machine behind the curtain. Elmer Gantry.ai, striding through the community, cloaked in virtual virtue.


Could Climatic Catastrophe be so much worse?
Terry

[Bob Wallace]

In the future we'll all be trustafarians.  Free to do what we wish with our time and our lives.  If we figure out a reasonable way to distribute goods and services.

I'm not sure we'll reach that state during any of our lives but we will move closer and closer to it.  I think what we really want to do is to assure that we don't create a 'slum-dweller' class.  If we do then we are likely to find some of us shoved into that unfortunate group as our services are no longer needed.

[Jim Hunt]

In the future we'll all be trustafarians.

You're sounding a bit like Jacque Fresco Bob?

http://econnexus.org/the-venus-project-world-lecture-tour-in-bristol/

My take:

Personally I'm not very keen on elites, but it sounds like experienced engineers like myself, apparently already conditioned to "consume" and to "punch people on the nose", might very well become a new elite following a change to a resource based society. Personally I'm not too keen on committees either. How would the members of Jacque's proposed "survey committees" be selected? At random? By virtue of being part of a new elite? By some other mechanism?

The video seems to have vanished. Here's another one instead:



See if you can spot Kasia and I near the start.

[Alexander555]

With AI, and robotics I can't think of any job classification that has an assured future, except perhaps for illegal trades. Safe crackers, purse snatchers, and purveyors of illegal substances or services should always be able to eek out an ever more dangerous living.
Think about your present employment, then ponder how much better a never ill, never forgetful, never distracted machine could perform your duties.


What we need in coming days is a way to so greatly expand the idle rich, that they combine with the newly created idle middle class as well as the idle poor.


Once a method of payment is decided on, we then need a way to keep these demographics separated. The idle rich certainly don't want to share their haunts with the idle middle class, and neither of these share interests with the bums at the bottom of the ladder.


How can we equitable finance these groups, none of whom contribute toward society as a whole, in a fair manner that retains the class distinctions that so clearly cut through all of our societies?


Terry

But will AI and robots be the future ?In some cases it will.  But if you look at that plastic issue. Where does it all comes from ? It comes from the way we live today. Maybe we should stop going to the supermarket, and go back to the bakkery, the butcher, the cooky shop, the brewer.... and bring our own sustainable wrapping. Because everything in the supermarket is pre-prepared ( i don't know the exact word), full with salt, fat and suger, and plenty of plastic. Probably we would have a much healtier life, than means less need for medecins, that ruin our water supply. If we stop ordering from Amazon, and buy in a normal shop, not everything has to be packed individual. They just bring it in a full container. That modern economy not only brought good things. It's mainly mass production at the lowest possible price, and in general that means maximum polution.

[Bob Wallace]

Packaging can be minimalized.  And the materials can be recyclable. 

Right now most of us have the option of buying bulk and reusing/recycling the containers.  Using our own shopping bags.  Largely avoid pre processed foods.

Deliveries can be made with renewable energy.

I suspect we'll move more to Amazon-like shopping where we order rather than visit the store to pick what we want.  Delivery will be done by robotic vans that will show up on our schedule so we can put our purchases away.  It will be a lot easier to send in reusable packaging.

[Avalonian]

Packaging can be minimalized.  And the materials can be recyclable. 

Right now most of us have the option of buying bulk and reusing/recycling the containers.  Using our own shopping bags.  Largely avoid pre processed foods.

We have a new greengrocer in town, totally packaging-free. Cardboard veg boxes that the food's delivered in (or your own bags) are what you take it away in. You can also buy oils and condiments - bring your own bottle. It's only been open a few weeks, and they're having to get multiple deliveries per day to keep up with demand. Local gardeners are now asking if they can sell their surplus there.

This sort of approach is entirely possible - it just needs someone local to stop worrying, and do it.