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Capitalism has no foresight.

Today I heard on the radio how the economy has so drastically turned on the former Irish Tiger that people are being pushed into the security industry since that seems to be one of the few growth industries. Ireland copied a version of the development program Puerto Rico followed out of the forties under operation bootstrap. It gave tax breaks to American Corporations that set up in Puerto Rico, similar to the way Dell set up in Ireland. Puerto Rico also made these tax-breaks subject to being located outside of the capital to encourage development in the country-side, which was a brilliant idea. Since Puerto Rico was mostly undeveloped in the rural areas and only the capital of San Juan and surroundings had been developed. This development program was abandoned in Puerto Rico by pro-statehood government because these tax-breaks would result in an obstacle towards statehood. This had an adverse effect on employment, though I think this was small considering the effect of the brain-drain this caused. Since the forties this program had shifted from low-skill manual labor to highly trained engineers in high technology businesses and pharmaceuticals. So while many low-skill jobs were lost when plants closed, it was far more brutal on the high-skill jobs that left the country permanently.
So we come to what's happening on Ireland right now, and why Capitalism has no foresight. Capitalism as a system of distribution of resources is very good at dealing with scarce resources and allocating them to their most efficient use. Capitalism puts high value on the scarce resource (whatever that may be, be logs, coal, or people) that's traded on a market. (This last part is the one that most Neo-Conservative, Anti-Environmentalists Free Marketeers miss, since nobody trades forests, or environmental futures). The other hand of this is that Capitalism has no foresight, it doesn't predict what will become scarce in the future, only what's scarce right now. In this case I'm talking about careers. In the nineties I saw how that happened to the field of programmers. In the eighties the programming industry had a boom and bust cycle, where lost of programmers were left unemployed. I met one FORTRAN programmer (a language so old I thought it was no longer used when I heard about it) that was working for the city of San Juan at the time I entered college in 1993. He left that career permanently after being laid off by a company in the mid-eighties. When I entered college, you could see the effect this had had on the Computer Science department. It wasn't a hip dept. I was good at it in HS and took the intro class but got disenchanted by how hostile the teachers were and how impossibly math based everything was. (My first programing assignment on my C class was "Hello World" easy enough. The second was write a program that draws a graph of a 'Fibonacci'-like number sequence. It took me a week to find out what this number sequence was, let alone write a program that draws a graph....pre-Wikipedia days sucked for researching knowledge). But that changed very quickly because suddenly programming was a hot career. But why was it a hot career? Well mostly because after the 80's it went down in popularity, and when suddenly the web exploded, there weren't enough programmer, so they were a scarce resource. But they were a created scarcity. I going to repeat that: it was a self-created scarcity. The reason that programmers were scarce was that Capitalism dis-encouraged it's study. Economics de-incentivized it. This is a key feature of capitalism. While it will explode in rewards for a scarce resource be "air plane pilots" or "programmers" or "nurses" it can go the other way in an instant. This is not a big problem if you're dealing with things or gadgets or widgets but very different if you're dealing with careers. It pays to have foresight since the scarce resource of tomorrow, i.e. the career of tomorrow are not necessarily the hot career of the day. Also do we want to be scarcity the main determiner of the remuneration of a job? How about it's value to society?
The key problem here is that some career have critical periods. So while you may need experience entrepreneurs or accountants, if there are no jobs for inexperienced entrepreneurs or beginning accountants/programmers/whatever you will have a very scarce or even non-existent resource. Free marketeers have a blind spot here. Let's pay more attention to this blind spot of capitalism. The post World War II years in America were unusually stable and have led to an assumption on the stability of capitalism. But this stability has nothing to do with capitalism. So markets are more like followers of the latest trend, the market is not a trend setter, and when deciding how to lead and develop our society we should keep that in mind.


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