The Lost Boys - Part II

| September 23, 2022

I am paying close attention to the recent market volatility. We shall be rebalancing accounts accordingly and have already begun locking in some of the rates that this turmoil has provided us. We are not completely there yet, since the Fed has not yet sufficiently reduced its bond and mortgage portfolio. We are beginning with shorter maturities, which pay well now. Doing so is a tedious process, but I think we have time. Until then, I hope to take advantage of better prices in select areas.

The Lost Boys-Part II

Solving our current inflation problems will require diversification of our supply chains and the reshoring of essential industries. We shall do it, but it won’t be easy. Like France after the reign of Louis XIV, we have lost the skills that made us great. A good example is specialized welding, which is necessary to make the high-pressure boilers used in nuclear power plants. Apparent prosperity allowed us to ignore that fact that these skills have been offshored. It also enabled us to ignore that we traded useful skills for an army of idle men and destroyed lives.

As promised, I shall briefly discuss some highlights from three books that I believe deal honestly with the problem and seek to find practical solutions.

  1. Nicholas Eberstadt, Men Without Work: America’s Invisible Crisis *

Eberstadt provides the shortest and easiest summary of a giant problem. This book reads exactly like what it is, a work by a talented economist. In other words, he is short on style and long on facts, figures, charts, and graphs. Yet, he gets the human problem right “the genial indifference with which the rest of society has greeted the growing absence of adult men from the productive economy is in itself powerful testimony that these men have become essentially dispensable.”

I seek out authors of differing viewpoints who wish to solve problems, not win fights. Eberstadt meets the criteria by dividing his book into two parts. In Part I he lays out the problem as he sees it. In Part II he invites others with dissenting viewpoints to make their cases. Some bullet points:

  • By 2015, nearly 22 percent of U.S. men between the ages of twenty and sixty-five were not engaged in paid work of any kind.
  • Between the early 1950s and today, the work rate for adult men has plummeted by more than eighteen percentage points.
  • A single variable—having a criminal record—is a key missing piece in explaining why work rates and LFPRs [Labor Force Participation Rates] have collapsed much more dramatically in America than other affluent Western societies over the past two generations.
  • As a direct consequence of crime and punishment trends since the 1960s, American society now contains a truly vast, if generally invisible, army of noninstitutionalized felons and ex-prisoners.
  • Our statistical systems do not regularly collect social or economic information on ex-prisoners or felons in society at large.

2. Anne Case and Angus Deaton, Deaths of Despair and the Future of Capitalism **

Anne Case is Professor of Economics and Public Affairs Emeritus at Princeton University. Angus Deaton, also a professor of economics at Princeton, won the 2015 Nobel Prize in Economics. The married couple coined the term “deaths of despair” to describe the loss of life expectancy among America’s working class due to drugs, alcohol, and suicide. Being economists, they firmly believe in free markets. However, the couple recognize that “capitalism does not have to work as it does in America today. It does not need to be abolished, but it should be redirected to work in the public interest.”

This compassionate and thoughtful book fleshes out the problems listed by Eberstadt and aims to restore dignity to work. According to the authors “jobs are not just the source of money; they are the basis for the rituals, customs, and routines of working-class life. Destroy work and, in the end, working-class life cannot survive. It is the loss of meaning, of dignity, or pride, and of self-respect that comes with the loss of marriage and of community that brings on despair, not just or even primarily the loss of money.”

Case and Deaton’s last chapter provides concrete suggestions for how to solve the problem. I share the sentiment expressed in the chapter’s first sentence “we would like to see an America that is more just.” Hallelujah! We will all profit by it in the end.

3. Oren Cass, The Once and Future Worker: A Vision for the Renewal of Work in America ***

A policy wonk, Cass is a senior fellow at the Manhattan Institute for Policy Research. Previously, he worked as the domestic policy director for Mitt Romney’s presidential campaign. Unsurprisingly, he begins his book with what he calls “the Working Hypothesis: that a labor market in which workers can support strong families and communities is the central determinant of long-term prosperity and should be the central focus of public policy.”

Cass cites the work of Case and Deaton but adds his own unique observations. For example, “life satisfaction drops ten times more from unemployment than from a substantial loss of income. And while people return to their previously self-reported levels of happiness several years after marrying, divorcing, becoming widowed, or welcoming a first child into the world, they never get used to joblessness.”

Among his many insights that struck me is the failure of analysts to properly weigh costs when projecting the benefits of regulation. In this he reminds me of Cambridge economic ethicist Jonathan Alred’s book License to be Bad: How Economics Corrupted Us. In classic Dr. Strangelove mold, analysts do not consider the health of the unemployed and the impact on communities when weighing costs and benefits. Compliance is nonobtainable, which leads to offshoring and the destruction of entire communities. Social ills multiply and so do deaths of despair. Poverty becomes endemic among the working classes. None of this is calculated as costs by analysts who live far from the people whose lives are destroyed. Cass carefully lays it out and provides the research to support his charges and solutions.

We may be on the verge of an investing paradigm shift. The mega-tech companies that employ few Americans but generate giant profits from offshoring may have lost their leadership position. I believe that we need to pay close attention to whether our public and private sector leaders can adjust to reshoring and move supply chains to nations that share our democratic values. There is tremendous opportunity if they can.

* Eberstadt, Nicholas. Men without Work: America's Invisible Crisis (West Conshohocken, PA: Templeton Press, 2016), pg. 5, 17, 22, 130, 131, 355.

** Case, Anne, and Angus Deaton. Deaths of Despair and the Future of Capitalism (Princeton, NJ: Princeton University Press, 2020), pg. ix, 8, 245.

*** Cass, Oren. Once and Future Worker: A Vision for the Renewal of Work in America (ENCOUNTER Books, 2020), pg. 2, 31, 88.