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In a pure market economy, the price of things depends upon many factors, but the price of labor is always one of the biggest elements. At present the price of labor in the US is relatively high compared to every other place in the world, but as the quality of life in those other places rises so will the cost of labor. The flow is presently toward India, China and many other smaller countries. Part of this is made possible by the very cheap cost of transportation at the moment, and that is because of the cheap price of oil for operating transportation equipment. Over the next thirty years the price of oil will surely rise and with that the percentage of the price of transported goods to their movement. However, the price of intellectual labor is not restrained by the costs of transportation, like durable goods, and data transfer across the world on the internet is almost cost free. Jobs which can be digitized have a natural flow going most rapidly to well educated people living in low cost neighborhoods, such as India.

But then returns the essence of the argument made by Adam Smith and Thomas Malthus — because of the creation of more babies when times are good, there will eventually be a shortfall of food and when that happens people will work for the price of their food. When that eventually happens, an individual doesn’t want to be in a position of being forced to live from day to day on his labor for his food, housing or other essentials, especially because food prices may fluctuate violently from day to day. Famines have hit India and China in the past, but in this electronic age, when that happens the price of intellectual labor worldwide will drop to the price of the cheapest caloric food available to the workers in the famine-struck area. While transportation is still cheap food can be transported to anywhere in the world that has the money to pay for it. Thus, rich people in India may eat well, while poor people in the US may be starving.

Americans may be unwilling to watch their poor people starve, so there will be efforts to prevent the export of food. Americans have never had to face these types of decisions, because there has always been plenty of food, so there will be considerable social unrest. I remember years ago in November 1970, Bangladesh had a horrible typhoon which killed some 500,000 people. It made the US news for a few days, but what stayed on the headlines of the American newspapers for a month was a couple of rock climbers, Warren Harding and Dean Caldwell, spending 26 days on the vertical side of Yosemite’s Half Dome. It appears that an American at risk gets more attention here than half a million foreigners dying. That same attitude might play out in a future famine too. Also, by the time these terrible conditions arrive, Americans may be terrified of losing even more jobs to foreigners and struggle even harder to prevent the export of food.

The flow of jobs is to India at present, and will continue for a while, especially those jobs that can be digitally transmitted. And jobs that require physical presence in America are being taken over by foreigners who travel there and will work for lower wages than native born people. These flows of people and information are temporary and will stop when an equilibrium is reached. Because education via the internet is now free for the effort of taking it, what will come to the fore is the ability to do a job well and do it cheaper than anyone else in the entire world. When the famine finally comes highly skilled people will be willing to work for food alone to keep from starving. Some will starve.

The price of the cheapest food in the world will determine the price of digital labor everywhere.