Via Charles Hugh Smith:
C. Smith writes:
Correspondent Michael S. recommended this story on a parallel line of thinking: Yes, The Web Will Bankrupt The Government:
Long-argument-short: The explosion of the web created so many new non-financial transactions, non-financial markets, and opportunities to create and enjoy oneself that don’t cost a penny, that ultimately we’d move decisively to a more dynamic economy, but one with less actual money. And since we can’t pay taxes in “attention”, this would cause the government to run short of funds.
“In other words: is a high-tax/high-cost economy with tens of millions of people with no prospects of formal paid work sustainable? Can an economy dependent on abundant cheap credit sustain itself once that abundant cheap credit is no longer available? Can an economy with far less money churning through the government tax system sustain a vast entitlement/welfare “Savior State” which “saves” everyone from calamity?
Clearly, there is no Plan B for the U.S. economy. If tens of millions have no income, and are bartering and drawing welfare to survive, then the question arises: are the remaining employed productive enough to support the tens of millions already drawing Social Security, Medicare, SSI, disability, VA pensions, etc., and all the other “pay as you go” programs?
What if the Web, which is busily (creatively) destroying print media, the music industry, the movie business, Microsoft and many other rentier-type enterprises, ends up destroying income and profit-based tax revenues? How can the government support a status quo which requires $2 trillion in new borrowing every year just to keep from collapsing? What if that debt load is unsustainable?
It has long been my thesis that the productive few are increasingly incentivized to “opt out” of the burdensome system they are supporting.
Put another way: can everyone drawing an income (job, pension, unemployment, workfare, etc.) from the State (government at all levels) provide the tax revenues needed to pay the interest and all the other costs the government has promised to pay? If not, then who will be left to pay all the taxes if the productive few opt out?
If jobs and money dry up, so too will the Savior State based on jobs and the churn of money. We need a Plan B economy, one not dependent on cheap, abundant credit, high consumption, high taxes and unsustainable promises.”
In a related entry, Charles Smith is much more specific about the specific mechanisms of web-induced creative destruction, but focused on jobs rather than taxes:
“The Internet and digital information technology are creatively destroying entire industries and entire job classifications which will not be coming back. Examples include the music and publishing industries and administrative overhead jobs such as file clerks and customer service representatives.
Even the IT sector itself (information technology) is vulnerable to the automation of software and coding. In industries such as tax preparation, 90% of their high-priced labor can be replaced by $30 software.
The consequences of the Internet’s ubiquity are far-reaching. Not only can vast swaths of digital work be automated, much of the remainder can be performed overseas at lower labor rates than in the U.S. (Recall that up to half of a U.S. employee’s compensation costs are healthcare and other overhead costs, so a wage-to-wage comparison will be misleading.)
As the Internet enables telecommuting and home-based digital work then the need for millions of square feet of office space falls, further pressuring the demand for high-cost commercial real estate.
Internet-enabled retail trade (Amazon.com, eBay.com, Zappos, etc.) is decimating high-rent brick-and-mortar retail outlets; as these close their doors then the demand for retail space falls precipitously, pressuring rents downward.
Just as craigslist has essentially wiped out print classified ads and Internet ticket sales have driven most travel agencies out of business, many other fields and industries will be reduced or eliminated by the efficiencies made possible by the Internet. Even fields like education may find the need for costly physical space may diminish as high-cost education migrates online.
Political control depends in large part on a quasi-monopolistic mass media amenable to the political goals of the State and Plutocracy. To the degree that the Web undermines that mass media’s monopoly on “news” then it also undermines the political control of the State and its Plutocratic overlords.
The Internet/Web is thus the acme of creative destruction, for it is undermining all monopolies except that of capital and petroleum.”