The Decline of Self-Employment and Small Business

Small business is the incubator of employment. As it declines, so too do opportunities for first jobs, second chances and economic independence.

Self-employment and small business are two sides of a single economic coin: financial independence. The Bureau of Labor Statistics (BLS) counts two types of self-employed, the unincorporated and the incorporated. The unincorporated may have employees, but typically do not, i.e. they are sole proprietors. The incorporated have employees, starting with the owner, as the BLS counts the incorporated self-employed as employees of their own corporation.

I know that's confusing, but it's important to separate the sole proprietors from those "self-employed" incorporated businesses that have employees: law firms, doctors' offices, accountants, etc.

When we speak of "small business," we're referring in large part to the incorporated self-employed: people who establish corporations as the legal structure for their enterprise.

Nothing is simple when it comes to parsing all the data, of course, but the BLS has a paper that explains the basic categories: Self-employment in the United States (Bureau of Labor Statistics).

The BLS attributes the decline in unincorporated self-employment from 1950 to 1970 to the consolidation of agriculture. As agriculture became more mechanized, small farms were no longer viable and farming required less labor. As a result, many self-employed farmers and laborers became employees or moved to other sectors.

The trajectory of self-employment from 1970 to the mid-2000s tracked general economic growth, which was weak in the 1970s but began a 30-year boom in the early 1980s.Things changed in the recession, as the self-employed ranks have lost 1.6 million from the peak in 2007. The number of self-employed has fallen to early 1980s levels: (All FRED charts courtesy of frequent contributor B.C.)

This chart displays the self-employed as a share of total non-farm employment.The first chart showed a strong rise in self-employment from 1970, but this chart shows that employment rose even faster: the self-employed share of all those employed has been declining for 30 years:

We can attribute this trend to the rise of global Corporate America and government employment. The workforce expanded, and relatively more people became employees of corporations or the government than became self-employed.

It's important to note here that the BLS does not break down the income of unincorporated self-employed: if millions of self-employed saw their net incomes slashed in the recession, the BLS still counts them as self-employed. So a consultant who earned $100,000 prior to the recession and now scrambles to net $10,000 is still self-employed.

This is the statistical equivalent of 6 million people losing full-time jobs and then 4 million of those people getting part-time jobs. Did employment truly recover most of the losses?

This chart displays total non-farm employment (blue) and the incorporated self-employed. Unsurprisingly, the rise and decline of the incorporated self-employed tracks the general economy and total employment.

But once again we have to note the limitations of the data. As B.C. observed, some of the recent rise in incorporated self-employed is the result of tax policies favoring corporations; the newly incorporated may well not have any employees, i.e. they are simply sole proprietors who incorporated for the tax benefits:

Historically, in order for incorporated self-employment to grow, it requires an increasing share of the population that is inclined to, or capable of, first becoming unincorporated self-employed. A growing share of the incorporated self-employed since the '00s are one-person S corporations (to take advantage of favorable tax treatment) or limited partnerships (LPs) and limited liability corporations (LLCs) in real estate for pass-through purposes that hire few, if any, employees.Consider that the US employment base is disproportionately dependent upon the viability of as few as 4% of the labor force and fewer than 2% of the population as the primary "job creators", i.e., incorporated self-employed.

After a brief increase in 2012, the self-employed as a share of total employment is falling off a cliff:

United States’ new business formation rate continues dropping steadily

Spend some time walking through Silicon Valley or New York City, and you’ll likely leave under the impression that entre­pre­neur­ship is alive and well in the United States. But spend some time wading through some of the latest census data, and you may come away with a very different impression.

This trend is reflected in the decline of small business in general:

Although many analysts claim most employment growth now comes from corporations, once again we have to look beneath the surface and ask what kind of jobs are corporations creating? More part-time fast-food positions?

Small business plays two critically important and often unrecognized roles. One, it tends to give new workers their first employment experience. The corporate human resources departments are not so forgiving--have you had your third interview yet? Only two more to go....

Two, small business tends to train workers who are then able to move up the job ladder to better paying corporate jobs, having learned the ropes at a small business. If you talk to corporate insiders, they will admit (in private) that their own job training efforts are limited: it's faster and more productive to poach your new hires from a competitor than invest years bringing up new talent.

Corporations may point to their intern program as "job training," but this is all too often a PR facade for unpaid slave labor. How many interns learned anything remotely useful? How many end up with full-time jobs at the company? The typical answer is: very few.

Small business is the incubator of employment. As it declines, so too do opportunities for first jobs, second chances and economic independence. 

---

Special "the end of the world as we know it" sale on seeds from our longtime supplier Everlasting Seeds:TEOTWAWKI SALE! 20% OFF!
In light of the calamitous predictions regarding the Global Coastal Event [Clif High], Korean Nuclear tensions, and Solar/EMPs “Kill Shot” {Ed Dames}, we thought we'd offer folks the largest discount we've ever given. We're not 'fortune tellers' here, or Seers, or 'Intuitives': but if even ONE of these predictions come to pass, it'll definitely make for a 'bad hair day' {week/month/year...} for all of us... 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, William K. ($50), for yet another wondrously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Thank you, Wayne H. ($50), for your splendidly generous contribution to this site -- I am greatly honored by your support and readership (and I dig your guitar playing, too).

Read more...

A Radically Simple Life

Simplicity requires eliminating virtually everything we are "processed" to want and need for personhood, and accepting the intrinsic complexity of meaningful projects.

There are two basic ways to reduce the stress described in yesterday's entry, The Silent Epidemic in a Broken, Deranged System: Stress: simplify one's life and take control of one's life.

The two are not mutually exclusive, of course, but one does not necessarily lead to the other. For example, an unemployed single person who cashes a check from the government and eats fast food has a very simple life. One fellow I knew with this simple life rented a room in a rooming house and spent his time watching films and hanging out with his pals. Life couldn't get much simpler than that.

Did he control his life? Yes, but we would be hard-pressed to declare his adolescent lifestyle positive. To the degree he was dependent and aimless, it could be argued that his control was superficial, since his life was not directed toward any meaningful goals or purpose. He had the same level of control over his life as a teenager on summer break.

We lose control when we become trapped. Being heavily in debt is being trapped; being burdened by too much stuff or too many commitments is also being trapped.

Does the shopaholic debt-serf feel in control? They do when they're shopping--that's part of its appeal. It's the consequences of debt and over-spending that the shopaholic has little control over.

Studies have found that the most stressful occupations are those in which the employee has very little control over the workplace. So changing one's life to extend meaningful control over the consequences of one's choices reduces one primary source of stress.

Increasing one's range of action, i.e. stop being trapped, is one way to increase control over one's life.

A meaningful life is rarely simple. Many hold up a monastic life as simple and meaningful, but even a monastery is a complex enterprise. Someone has to manage the workflow, maintain the buildings and gardens, settle minor disputes, handle donations and so on.

Everything I espouse here is intrinsically complex. Being self-employed, preparing real food, growing your own vegetables and fruit if at all possible, building your own house--each project is time-consuming and requires experience and multiple skills.

It is far easier to drive to a fast-food outlet and get a prepared meal for a few dollars than it is to pull some beets from the ground, clean them, and prepare the leaves and the beets separately. It is much easier to buy a meal at a restaurant than it is to nurture a patch of dirt. (Gardening requires stewardship of the soil--a large topic in itself.)

It's a lot easier to buy a peach than to tend a peach tree. I just spent hours plucking off surplus fruit from our tree--a necessary pruning when hundreds of fruit threaten to overload the tree and produce an abundance of small fruit.

Being self-employed or running a small business requires wearing multiple hats at all times, and being devoted to one's clients and customers regardless of one's state of mind or energy level. To survive, self-employed/entrepreneurs must pursue continual learning. Being self-employed is an endless triage--what won't get done today?

It's quite simple to pursue a life of sloth and torpor, a path of self-destruction honeyed by the appealing aimlessness of permanent adolescence. It is difficult to keep fit, and it also requires self-knowledge, learning and experience.

A meaningful life directed at purposeful goals is inherently complicated. Everything of value takes time, focus, energy and a willingness to adapt and learn. Taking the kids out for a bike ride is a lot more complicated than turning on the TV: the bikes have to be maintained, the kids' helmets have to be securely fastened, and the adult has to be vigilant at all times, scanning for potential dangers and offering guidance without being so heavy-handed that the ride loses its fun.

Is this a simple activity? Only from the outside.

The key point here is the goals can be few and simple, even as the tasks are complicated and contingent. Though we can't simplify inherently complex projects, we can strip away self-destructive pursuits and habits, and simplify the goals we are pursuing.

Since we live in a culture dominated by marketing and double-binds, we often say we're pursuing a goal but our actions and choices run counter to our stated purpose. People claim they want to pursue self-cultivation, for example, but then they indebt themselves so heavily that they do nothing but commute and work a job they dislike: Why People Hate Their Jobs (James Altucher)(via Kenneth D.)

"Someone on quora asked me: why do people hate their jobs? I answered: Note, not everyone hates their jobs. There are some “entre-ployees” out there that love their jobs. But for the other 98% of the population..."

Here is a typical advert for packaged food, which I have adjusted with truthiness:

There are many small things we can do to simplify those mechanics of life that can be simplified: have one credit card instead of seven, for example. Cook a stew or pot of chili that will last a few days so we don't have to cook every night. Stop watching network and cable TV, with their incessant marketing of insecurity and self-destruction. Devote some time to being disconnected and allow your mind to wander, for example, taking a walk without a phone, iPod, etc. Before you start your day, ask if the day's activities serve your short list of goals and your chosen path.

Simplicity isn't necessarily simple to achieve. It requires eliminating virtually everything we are "processed" to want and need for personhood, and accepting the intrinsic complexity of meaningful projects.

---

Special "the end of the world as we know it" sale on seeds from our longtime supplier Everlasting Seeds:TEOTWAWKI SALE! 20% OFF!
In light of the calamitous predictions regarding the Global Coastal Event [Clif High], Korean Nuclear tensions, and Solar/EMPs “Kill Shot” {Ed Dames}, we thought we'd offer folks the largest discount we've ever given. We're not 'fortune tellers' here, or Seers, or 'Intuitives': but if even ONE of these predictions come to pass, it'll definitely make for a 'bad hair day' {week/month/year...} for all of us... 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economyComplex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).
We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, James M. ($20), for yet another wondrously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Thank you, Jason D. ($25), for your much-appreciated generous contribution to this site -- I am greatly honored by your support and readership.

Read more...

The Silent Epidemic in a Broken, Deranged System: Stress

It's not only the individual who needs help adjusting to chronic stress--the deranged system he/she inhabits needs to change.

Longtime readers know that I see our system not just as financially sick but as spiritually and psychologically deranging. The illnesses are related, of course--a distorted economic system (i.e. financialization) that rewards parasitic sociopathy and political predation cannot help but make its participants physically and psychologically ill.

Here is a selection of the many entries I've written on this largely ignored topic:

Serial Addictions, Serial Speculative Bubbles: a Sickness Unto Death (Feb. 2, 2010)

Welfare Nation: Addiction, Denial and Magical Thinking (February 1, 2010)

The Wider Context for Twenty-Somethings (Gen Y) in America (February 19, 2010)

Opting Out and the Culture of Entitlement (March 29, 2010)

Readers are often puzzled by the term The Politics of Experience, which is the core of the Survival+ analysis. The term comes from psychiatrist/author R.D. Laing, and I use it to describe the subtle ways that our worldview is molded to make certain forms of political and financial dominance so "natural" that we lose awareness of its arbitrary, carefully engineered structure.

America Is Just Going Through the Motions (November 19, 2010)

The Junkie in the Pool and False Idols (August 10, 2011)

Japan and the Exhaustion of Consumerism (October 18, 2012)

Narcissism, Consumerism and the End of Growth (October 19, 2012)

When Belief in the System Fades (March 12, 2008)

I recently received this commentary from Kenneth Daigle, a 33-year veteran stockbroker/financial advisor on the subject of chronic, systemic stress. (He requested that his full name be published.) Kenneth succinctly ties together the nation's economic distemper, its broken healthcare system and the culture of high expectations and consumerism:

I talk to hundreds of people in my practice, and I want to share with you an observation that I have made. With all the media attention lately on the fact that America has hit 90 million people who are not in the workforce, I see very little being written, asking the big question, WHY?

It is easy to say that the main reason is the entitlement culture affords people the ability to not have to work, but I am hearing the real reason is STRESS. People are reluctant to admit that they just can’t take the pressure anymore of day-to-day living, and the biggest way to relieve stress is to not work.

Think about how our culture is now structured for the average adult: STRESS, everywhere you look--commuting in horrible traffic, as you want to scream in frustration--money stress, to pay rent/house note, tuition, utilities, gas, insurances, vacations, cable bill, rising food costs, and on and on and on--stress from family problems, divorce, delinquency, drugs, crime, infidelity, keeping up with the Jones, etc.

People have too high an expectation of what they should have out of life, and get overly stressed over it all. How does all of this manifest itself? A prescription drug culture (Zoloft, Xanax, etc.) that tricks people into thinking a pill will knock back the stress, when these drugs, in my opinion, only make things worse.

I am hearing more and more that people just want to drop out from it all, as they are reaching a breaking point, and have decided less income and dependency on entitlements will reduce their stress, and is not so humiliating, so giving up working becomes more acceptable, to KEEP ONE’S SANITY.

I know I am correct, from the feedback I hear every day, and the financial media does not see this like I hear it every day. People don't want to admit that they are too weak to deal with stress, so the financial pundits are not aware of this critical factor because they don't talk to Joe Sixpack.

The government can stimulate all they want, but the unemployment/job problem will not improve because the root cause is not being recognized. We have built a culture that is far too stressful for millions of folks, so they do what they must for their mental sanity, by removing the stress of work. It matters not what level of pay they may earn, because their mental health is more critical than high income.

More and more, it is like a spiritual awakening, as people realize chasing after materialism was making them crazy with anxiety and stress. They find not working, and downsizing their expectations, makes it easier to cope with all the other aspects of living. If you wrote about this, perhaps it would help stimulate a national discussion addressing this issue.


Thank you, Kenneth, for your report from the world we actually inhabit, as opposed to the one that is dutifully reported in the mainstream media (i.e. everything's fine, unemployment is only 7.6%, go out and buy a new car, no down payment and easy credit, etc.)

In my view, the high cost of living is a direct contributor to chronic stress. While there are numerous explanations for the rising cost of living--Baumol's Cost Disease (Productivity, Baumol's Disease and the Cliff Just Ahead December 8, 2010) and the rising cost of energy, to name but two--the one key driver that nobody dares discuss is the state-cartel (crony capitalism) structure of our economy: cartels (defense, energy, sickcare, education, etc.) avoid competition, enabled and enforced by the State (government).

This explains why sickcare and education costs have skyrocketed far above the rate of inflation. Apologists try to invoke Baumol to explain the lack of productivity in sickcare and education, but the primary cause is the cartel structure of these industries which ruthlessly eliminates any real competition.

People respond to incentives and disincentives. If it's easier to fake a disability, get Section 8 housing, food stamps, etc., than it is to earn a productive livelihood, then people will fake a disability, etc.

As it becomes increasingly costly and risky to start a business and hire workers, then people won't start businesses or hire workers--unless they have a guaranteed government contract, i.e. they are quasi-public-sector employees.

Another factor few dare mention is debt-serfdom. By the time the brainwashed consumer has loaded up on the "absolutely necessary" debts--$100,000+ for college, $200,000 for a home mortgage, $20,000 for a vehicle loan, and whatever he/she can swing in credit card debt--the options to escape stress shrivel.

Bankruptcy and opting out is one option, but that requires sacrificing all the signifiers of identity and success--the very factors in a consumerist society that establish not just identity but self-worth and personhood.

I say few dare mention state-cartels and debt-serfdom, because once you question these you question the entire debt-based "growth" that underpins our social order. If people refuse to become debt-serfs, the system will implode. If the cartels were boycotted, the State would implode, because the political order depends on the concentrated wealth of private-sector cartels and the financialization Aristocracy.

In other words: eliminate the real sources of stress and you bring down the entire economic, political and social order. The Status Quo hopes another med or two will make all the debt-serfs' stress decline to manageable levels, but it's not only the individual who needs help adjusting to chronic stress--the deranged system he/she inhabits needs to change.
Kenneth also forwarded these chronic stress-related links:

10 Simple Ways to Live a Less Stressful Life
Are You Stressed Out at Work But Too Afraid To Quit Your Job?
STRESSED AND DEPRESSED: The unreported health crisis of the Obama era
'DISABLED' OUTNUMBER WORKERS IN U.S. MANUFACTURING

Cornell Professor Richard Burkhauser, a disability policy expert, warns, “SSDI is increasingly being used as a long-term unemployment program for workers who, given the appropriate rehabilitation and accommodation, could work.”The sheer number of people on disability is staggering, without even considering the policy’s other consequences. The number of people on disability, 14 million, is “more than the total number of employees in the manufacturing sector of the economy,” observed Nicholas Eberstadt of the American Enterprise Institute.
The government spends more on disability than it does on both food stamps and welfare combined, according to a blockbuster NPR report. The dependency trend and fiscal trajectory continue their death spiral, unmoved by the supposed economic recovery.

---

Special "the end of the world as we know it" sale on seeds from our longtime supplier Everlasting Seeds:TEOTWAWKI SALE! 20% OFF!
In light of the calamitous predictions regarding the Global Coastal Event [Clif High], Korean Nuclear tensions, and Solar/EMPs “Kill Shot” {Ed Dames}, we thought we'd offer folks the largest discount we've ever given. We're not 'fortune tellers' here, or Seers, or 'Intuitives': but if even ONE of these predictions come to pass, it'll definitely make for a 'bad hair day' {week/month/year...} for all of us... 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Thomas B. ($200), for your outrageously generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Thank you, Charles R. ($10/month), for your superbly generous subscription to this site -- I am greatly honored by your support and readership.

Read more...

How Empires Fall

The imperial tree falls not because the challenges are too great but because the core of the tree has been weakened by the gradual loss of surplus, purpose, institutional effectiveness, intellectual vigor and productive investment.

Comparing the American Empire with the Roman Empire in its terminal decline is a popular intellectual parlor game. The comparison is inexact on a number of fronts, starting with the nature of empire: Rome ruled a territorial empire, while the U.S. is a hegemony that doesn't need to hold territory (other than key overseas military bases); its dominance is based on the global projection of hard and soft power, diplomacy, finance and the monetary regime of the reserve currency.

Despite the apparent difference, the two empires share the key characteristic of all enduring empires: they extract the cost of maintaining the empire from client states and/or allies.

The mechanisms differ, but the results are the same: the empire's cost is distributed to those who benefit from its secure trade routes.

Two of the key characteristics of an empire in terminal decline are complacency and intellectual sclerosis, what I have termed a failure of imagination.

Michael Grant described these causes of decline in his excellent account The Fall of the Roman Empire, a short book I have been recommending since 2009:

There was no room at all, in these ways of thinking, for the novel, apocalyptic situation which had now arisen, a situation which needed solutions as radical as itself. (The Status Quo) attitude is a complacent acceptance of things as they are, without a single new idea.This acceptance was accompanied by greatly excessive optimism about the present and future. Even when the end was only sixty years away, and the Empire was already crumbling fast, Rutilius continued to address the spirit of Rome with the same supreme assurance.
This blind adherence to the ideas of the past ranks high among the principal causes of the downfall of Rome. If you were sufficiently lulled by these traditional fictions, there was no call to take any practical first-aid measures at all.

In other words, if our idea of intellectual rigor and honesty is Paul Krugman dancing around the Neo-Keynesian Cargo Cult campfire waving dead chickens and mumbling nonsensical claims of grand success, we are well and truly doomed.

The chapter titles of the book give a precis of the other causes Grant identifies:

The Gulfs Between the Classes

The Credibility Gap

The Partnerships That Failed

The Groups That Opted Out

The Undermining of Effort

I recently read a lengthier book by Adrian Goldsworthy titled How Rome Fell: Death of a Superpower.

In Goldsworthy's view, a key driver of decline was the constant political struggle for power drained resources away from protecting the Imperial borders from barbarian incursions and addressing the long-term problems facing the Empire.

Such conflicts for the Imperial throne often led to outright civil war, with factions of the Roman army meeting on the field of battle.

In other words, Rome didn't fall so much as erode away, its many strengths squandered on in-fighting, mismanagement and personal aggrandizement/corruption.

More telling for the present is Goldsworthy's identification of expansive, sclerotic bureaucracies that lost sight of their purpose. The top leadership abandoned the pursuit of the common good for personal gain, wealth and power. This rot at the top soon spread down the chain of command to infect and corrupt the entire institutional culture.

As the empire shrank and lost tax revenues, the Imperial bureaucracies continued growing, much as parasites attach themselves to a weakened host.

Individual contributions and institutional success are both difficult to measure in large bureaucracies, and it is tempting to define success by easily achieved metrics that reflect positively on individual contributions and the institutional management.

As the organization loses focus on its original purpose, the core purpose of the institution is given lip service but is replaced with facsimiles of managerial effectiveness, bureaucratic infighting over resources and the targeting of easily gamed metrics as substitutes for actual success.

People who have no skin in the game behave quite differently from those who face consequences. This disconnection of risk from consequence is called moral hazard.

Bureaucracies tend to institutionalize moral hazard: those managing the institution’s departments rarely suffer any personal consequence when the institution fails to perform its function. Funds are placed at risk, but the individuals making the bets with the institution’s money suffer no losses should their policies result in failure.

By breaking the institutional purpose into small pieces whose success is measured by easily gamed targets, the institution can be failing its primary function even as every department reports continued success in meeting its goals. Repeated failure and loss of focus erode the institution even as those in charge advance up the administrative ladder.

In the final years of the Empire, in the 5th century A.D., this institutional failure led to the absurdity of detailed descriptions of army units being distributed within the Imperial bureaucracy, while the actual units themselves--the troops, the officers and the equipment--had ceased to exist. In some cases, it appears bureaucrats and officers collected pay for supplying and commanding completely phantom legions.

The disconnect between the failure to fulfill the institution’s original function and the leadership’s rise feeds cynicism in the institution’s employees and erodes their purpose and initiative. Soon the institutional culture is one of self-aggrandizement, gaming of departmental targets, protection of budgets and a collapse of the work ethic to the minimum level needed to avoid dismissal. Personal responsibility for institutional failure is lost.

Does this describe the vast state fiefdoms and state-protected cartels of America's military-industrial complex, sickcare and the education industry? I think the answer is self-evident: yes. While there are still hard-working, competent people within these sprawling empires of moral hazard, these few are not enough to wring long-term success from negligence, friction and incompetence. All they can do is stave off implosion for a time.

There are many other causes for Rome's decline, including epidemics of plague, military over-reach, chronic deficits, debasement of the currency, a parasitic Elite that was immune to what was left of the rule of law, weak leadership, and rising dependence on the Central State for bread and circuses.

America is not Rome, just as the immensely successful Tang Empire in China (700-900 A.D.) was neither Rome nor America. These dissimilarities should not blind us to the underlying dynamics in the decline and fall of all great powers, which can be summarized as the slow erosion of shared purpose, surplus and the productive investment of that surplus.

When a storm arises--a conflict with neighboring powers, an outbreak of plague, a disastrous drought--the imperial tree falls, not because the challenge was too great but because the core of the tree had been weakened by the gradual loss of surplus, purpose, institutional effectiveness, intellectual vigor and productive investment.

---

Special "the end of the world as we know it" sale on seeds from our longtime supplier Everlasting Seeds:TEOTWAWKI SALE! 20% OFF!
In light of the calamitous predictions regarding the Global Coastal Event [Clif High], Korean Nuclear tensions, and Solar/EMPs “Kill Shot” {Ed Dames}, we thought we'd offer folks the largest discount we've ever given. We're not 'fortune tellers' here, or Seers, or 'Intuitives': but if even ONE of these predictions come to pass, it'll definitely make for a 'bad hair day' {week/month/year...} for all of us... 

---

Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

Kindle edition: $9.95       print edition: $24 on Amazon.com
To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Jeff M. ($100), for your outrageously generous contribution to this site -- I am greatly honored by your support and readership.

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The Risk-On Recovery Rolls Over

Wages, private-sector employment and labor's share of the economy have all declined: no wonder the risk-on recovery is rolling over.

Did anyone seriously believe the global economy was expanding so robustly that corporate profits would loft ever higher? Based on what data? Laughably bogus data from China, where warehouses are bulging with stockpiles of aluminum and copper, and a diminishing-return housing/credit bubble is the only "engine of growth"?

Or was it the equally bogus unemployment rate in the U.S. that inspired such confidence? Did money managers really not notice that most of those new jobs are part-time, and that the rate is only low because millions of people have statistically been disappeared from the workforce by central planners?

It's like the old Soviet propaganda trick of airbrushing out the comrades who fell from favor or who'd been given a "tenner" in the gulag. Millions of American workers have been airbrushed out of the picture, and presto-magico, the unemployment rate is a mere 7.6%.

Did anyone seriously believe the risk-on trade, driven entirely by central bank intervention and currency wars, was sustainable? Didn't anyone notice that beneath the veneer of forward earnings growth and other happy-talk, the real driver of the stock, bond, real estate, bat guano, etc. markets was all intervention, all the time?

Did anyone seriously believe fundamentals no longer mattered? Or did everyone just do the Chuck Prince tango, where you keep dancing until the liquidity-financial repression music suddenly stops?

It was all bogus and doomed to roll over, because the only fundamentals that count are not the levers the Federal Reserve pulls but employment and wages.Pulling the interest rate lever, the liquidity lever, the bail-out-the-banks lever, the buy a trillion dollars of fetid stinking mortgages lever, the buy SPX futures contracts via proxies lever, the POMO lever--they've all failed to move the needle on the only fundamental that counts, full-time private-sector employment.

Pushing the risk-on trade rewarded the 5% who own enough stocks to matter, and the top 1/10th of 1% who reaped the trading profits, but it didn't do diddly-squat for the bottom 95%.

Take a look at these charts. (all charts courtesy of frequent contributor B.C.)

Ramping up money supply did not lead to higher wages--unless you count the bonuses on Wall Street, of course.

The Fed pulled all its levers to maximum, and the economy created a few million part-time jobs.

Subtract government employment and sickcare-cartel jobs, and private-sector employment is at multi-decade lows.

Employment for people ages 16 - 24 is abysmal.

Here is the Bureau of Labor Statistics on the labor participation trend for the 16-24 age cohort:

From 1948, when the series began, to 1989, the July labor force participation rate for young men showed no clear trend, ranging from 81 to 86 percent.Since 1989, however, their July participation rate has trended down, falling by about 20 percentage points. The July labor force participation rate for young women peaked in 1989 at 72.4 percent, following a long-term upward trend. The participation rate of young women has fallen by about 15 percentage points since 1989.

The most important labor cohort is ages 35-54, when workers' earnings peak. Both employment and personal consumption have been declining for well over a decade, and both have rolled over:

Labor's share of the economy has plummeted: what color lipstick would you like on your risk-on pig?

Wages, private-sector employment and labor's share of the economy have all declined: no wonder the risk-on recovery is rolling over. 

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Things are falling apart--that is obvious. But why are they falling apart? The reasons are complex and global. Our economy and society have structural problems that cannot be solved by adding debt to debt. We are becoming poorer, not just from financial over-reach, but from fundamental forces that are not easy to identify or understand. We will cover the five core reasons why things are falling apart:

1. Debt and financialization
2. Crony capitalism and the elimination of accountability
3. Diminishing returns
4. Centralization
5. Technological, financial and demographic changes in our economy

Complex systems weakened by diminishing returns collapse under their own weight and are replaced by systems that are simpler, faster and affordable. If we cling to the old ways, our system will disintegrate. If we want sustainable prosperity rather than collapse, we must embrace a new model that is Decentralized, Adaptive, Transparent and Accountable (DATA).

We are not powerless. Not accepting responsibility and being powerless are two sides of the same coin: once we accept responsibility, we become powerful.

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To receive a 20% discount on the print edition: $19.20 (retail $24), follow the link, open a Createspace account and enter discount code SJRGPLAB. (This is the only way I can offer a discount.)

Thank you, Karl L. ($50), for yet another spendidly generous contribution to this site -- I am greatly honored by your steadfast support and readership.

Thank you, Paul C. ($120), for your outrageous generous contribution to this site -- I am greatly honored by your support and readership.

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