Creative destruction offers reset at great cost
The problems we face are structural, meaning we can't expect improvement without attacking fundamental economic problems. One of these is confidence in our money. Another is the shift of industrial production overseas. Still another is real estate--as long as prices fall due to foreclosure (indicating too much house, too little income, or both) there persists too little potential for price appreciation, which was once the magic ticket for the Middle Class.
Another impediment is reestablishing trust in the stock markets--democratizing the stock market investing was a great plus during the Clinton years in particular. Now, with the average stock only being held for something like 12 seconds, the average investor is in the unfamiliar waters of predatory short-term trading. And dominance over Wall Street by hedge funds and TBTF/bonus-crazy banks mystifies the process of investing, turning it into an increasingly volatile casino with fewer and fewer players.
These structural impediments must be dealt with in order to reestablish real, sustained economic growth. Politicians can pretend changing this policy or tweaking that one will really make a difference. It can't. That's why the call them structural problems.
All the political haymaking can't amount to anything because Washington is itself the source of the problems. Look at Obama's performance, which has defied his pre-election positions on bailouts for the banks, Guantanamo, warrantless eavesdropping, Afghan escalation, to name a few.
Once a President makes it into office, their first goal is re-election, not meeting campaign promises. While making liberals happy is nice, the Clintonian effort to triangulate White House positions to appeal to the maximum wide demographic has made a reappearance. Call it neo-liberalism, the reshaping of political priorities based on profit-centered economic imperatives.
For Bush's second term, the targetted constituencies were NASCAR Dads and Soccer (security) Moms. The issue that was chosen was therefore national security, which of the two patriarchs (blue clan or red) makes you safer?
Tacking to the Right on security issues, Bush was able to succeed. Obama intends the same thing. Some disgruntled former supporters have called his Presidency Bush's third. And what are progressives supposed to do? Vote for the Republican candidate? There's no choice at all--Obama knows that--and progressive ideals are left by the side of the road, abandoned as simple smoke and mirrors meant to propel Obama into office, mangled half-truths and innuendo having served their purpose.
It's time Americans were less naive about the way their government works. We no longer have representation in Washington--it's a capital dominated by special interest groups and corporations. Money rules. The two-party duopoly and resulting lack of real choice means elections for national office are a simple veneer slapped over a non-choice between corporatist Dems and social conservatives.
Most Americans choose to not stay informed, nor participate. Apathy is no doubt a contributor. If your vote never seems to change things election after election, there's a good chance the past will repeat itself. Interminably. So many choose not to care.
With our monetary system, the price of ignorance will be quite high. People are already seeing price rises, portions shrink, or both. The number of Americans on food stamps is at a record high. Off-shoring has drained incomes and job security for the Middle Class. Boomer retirement savings are anemic. It's both sad and ironic that many from our nation's most productive and accomplished generation will be dependent on government handouts to meet minimal living standards in their old age.
It's like the final days of the Russian empire. When the USSR finally fell apart, it was the pensioners who were most hurt. Old people, retired government workers, apparatchik and the like felt the debasement of the ruble as prices in the newly formed Russian nation rose dramatically.
I'm anticipating a similar scenario like that in the future here, perhaps a situation like Argentina's about ten years ago. We certainly have ripe conditions for a radical devaluation of the dollar. Like Argentina, our government could be forced to "borrow" bank deposits in order to pay foreign creditors.
For now, the Federal Reserve is handling our government's fiscal crisis, meaning the fiscal crisis is being handled "in the family". Perhaps the Fed intends to keep on buying U.S. Treasuries indefinitely, using the dollars we let them lend back to us, with interest of course.
Now the Fed itself doesn't profit, despite the swollen balance sheet; its charter is elevated beyond the balance sheets and profit statements. It's instead the sheer volume of money that passes through their hands that presents the threat. The Fed allows our government to borrow so much--more than would be allowable without its limitless buying of Treasuries--that they've become an enabler, serving to saddle our Treasury with so much debt that we'll never be able to repay, at least not without debasing the dollar.
It's not a debt default or credit downgrade where the worst effects of dollar debasement will appear.
"The United States can pay any debt it has because we can always print money to do that," said Alan Greenspan on Meet The Press on August 7th. We can always repay--our Treasury can always print dollars up, at least --or create them electronically as only 3% of our money exists in physical form.
Inflation will be the problem. If it weren't for horrendous, unchecked unemployment--the product of the departure of so many jobs overseas--we'd be feeling it even worse. Instead prices remain lower--a lot lower--because overall demand has trailed off.
If the unemployment picture were to improve, wages and income would climb along with rising prices and demand for higher wages. These pressures would present the Fed with a threat to its mandate to reduce inflation. So the Powers That Be actually have a vested interest in seeing unemployment continue, whatever the human cost.
Now in the Fed's defense, they do have a mandate to maintain maximum employment, and this they've attempted to do by keeping interest rates low. That's what's known as a monetary policy. The Fed can try to influence interest rates but can't control them.
One reason monetary policy has limits is because of fiscal policy--control over how much our government spends--is so out of control.
As much as the budget brinkmanship failed to reign in spending in any meaningful way, I'd say it's inevitable that our currency weaken given the size of the apparently unending budget deficits. And if you think all the Republican posturing actually saved any money, you must've missed the huge savings of $7 billion in 2011 we can fawn over thanks to the Tea Party.
To make matters worse, the Republicans think we can have our cake and eat it too. Taxes have been vilified. Reduced to the lowest point in decades, Federal taxes are too low to pay our bills. The lack of tax receipts mean we must borrow. At some point even the Republicans will have to acknowledge the truth--that we're spending way beyond our means and despite all the rhetoric, they've been completely unable to reign in spending in Washington.
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I wonder if capitalism is flawed. The Kondratieff cycle, named after a Russian economist, occurs every seventy years or so. Industries overuse capacity, the means of production have shifted to new countries, the means of production age and grow less efficient. Kondratieff thought that periodic busts helped restore capitalism's vitality, by forcing new creative solutions to problems plaguing the last economic cycle. Industry responds by forming modern processes that do more for less, enhancing productivity and starting off the beginning of another long cycle.
The price of gains in productivity and efficiency seem to be considerable economic pain. Maybe that's the only way a capitalist system can unburden itself of outdated and less efficient modalities. Creative destruction, so to speak.
The reality: technology makes it no longer practical to utilize as many people as we once did in manufacturing and agriculture. As an example, a few years ago Fortune 500 Company down the street put in a new, multi-million dollar machine in their factory. The total number of people needed to operate this machine: about 12.
Labor resources need to stay as nimble as possible to meet the elevated needs of high-tech manufacturing, where computer skills are vital. Paradoxically, a growing problem in American manufacturing appears to be the lack of adequately trained (technical degree or similar) working folk. This even as unemployment lines continue to grow.
Where capitalism should encourage retraining and redevelopment of resources, it seems more prone these days to reject outright those workers with dated skills. So merciless is the job environment that those unfortunate enough to be unemployed are actually being "delisted" on employment sites (see petition). Here's the e-mail fromchange.org, dated August 18th:
On Monster.com, employers are allowed to prevent anyone who is currently unemployed from applying for a job.
It's cruel to the millions of Americans out of work -- but you can put an end to it this week.
Kelly Wiedemer, who lost her job in 2008, has launched a campaign demanding that Monster.com ban these discriminatory ads. Please click here to sign Kelly's petition.
A nationwide backlash against the company, which treasures its reputation as a website that helps people find jobs, will force Monster.com to act.
Please sign the petition today asking Monster.com to stop discriminating against the unemployed.
Thanks for being a changemaker,
- Jess and the Change.org team
OK, so the message is clear: if you're out of work, you're on your own. The people who need jobs the most can be marginalized, like the homeless or mentally ill.
In the capitalist machinery, an individual is judged by the size of their bank account. The more you make, the more you can have. If for some reason you make less, it's because you deserve less. The message is an all-out assault on the ego: you're unemployed and deserve to be. How just like the treatment for a minority group that goes unaccepted by society. As minority group members know all too well, if you're not in the majority, your needs just aren't considered as valid. And if you fail at wage-earning, then our society judges you a failure. How binomial.
I'm disgusted by how people on the Right yearn for some mythical Ronald Reagan-esque time when all we have to do is for government to cut taxes and deregulate. Then everything will be fine once again. Well, it won't. We've burned through our credit--$14 trillion so far, with the present value of future liabilities like Medicare amounting to five times as much.
Now all that borrowing capacity has been compromised, we're left to turn to shady organized crime loansharks, otherwise known as bankers. The price of borrowing from them is that we must run our printing presses nonstop to churn out enough dollars to keep the Great American Money train rolling. This in economic terms is monetizing the debt, a process which leaves initial investors in dollar-denominated assets much poorer as newer, cheaper dollars are forced onto the economy, eventually making everything more expensive.
Hippie days here again?
Wanna cop out? Go the way of the hippies? Imagine a lifestyle today without the constant demeaning influence of things like jobs and money. I mean who needs that? What more noble ideal than to roll with the changes, liberated of concerns over superficial things--at least to the hippie--like jobs and money.
There was a real joy in touring with the Grateful Dead. I didn't see enough shows to qualify as a deadhead but did get to taste the life. Enduring the constant movement from venue to venue was really draining. Just a few concerts would drain you physically and emotionally.
I don't know how some people could continue day after day, show after show, city after city but it could be done! The lifestyle comes at quite a cost from constant indignities and logistical struggles. The reward actually comes in the little things denied this existence: peace, quiet, just stopping and smelling the roses becomes a luxury.
Perhaps freedom still waits on the open road. I've heard of a new breed of Americans who choose to live a nomadic lifestyle, searching for work from town-town. They use RVs as the modern equivalent of frontier wagons, except instead of settling westward, the "Workcampers" go in seemingly random directions in search of work.
See the alternet.org article by Michael Thornton here.
Workcampers might be an escape from the ordinary relationship between an employee and their place of work. The entire American suburb was a predecessor development even farther out of the city. Yet those migrations were matters of choice. The suburbs were more livable.
Perhaps the lifestyle of the Workcampers shows that economic necessity takes precedence in our lives. Like herds of migrating animals, they'll go wherever the work is.
This kind of lifestyle might be a free choice, like by retirees with sufficient income to survive this lifestyle. But the Workampers' state of constant motion depicted in Thornton's article work is more a matter of survival than choice.
Whatever criticisms that can be levelled at the migrant workforce, it's nothing new. During times of extreme economic stress, people from economically depressed states to move to states with brighter prospects. Gold rushes could motivate large blocks of people far into the hinterlands--all for riches. Today's modern-day equivalent is more like a travelling carny road show, and no pot of gold lies anywhere behind the rainbow just long, grueling hours for little pay.
Many 'Okkies' fled their home state of Oklahoma when the Dust Bowl of the Thirties hit. California took in many of them. If the economic equivalent of a Dust Bowl were to hit, people might pack up and move towards more appealing job localities, like lights at the end of the tunnel. Yet many of the jobs the Workampers get are of the minimum wage variety. And the more people who need lower, service-end jobs, the more challenging the hiring process and less well paying the offerings.
A community can't be built if neighbors are constantly coming and going. What of all the relationships people need to form? I guess as a Workcamper, you would make friends with those living a similar nomadic lifestyle.
Not sure how well the Workampers could reorient themselves to a particular community, much less be welcomed. As a Workamper visiting more sedentary friends, you could park your RV in the driveway like Cousin Eddie (played by Randy Quaid) in the Chevy Chase classic Christmas Vacation. (IMBD)
I've heard of rows of Rvs parking in California streets, next to the beach and so on. Something not so bad until it happens to you. It's easy to be progressive with where other people live if it's nowhere around you.
So the Workampers will always be a subgroup, with limited ties. In time, though, I guess recurring migrations could create bonds among the --literally--journeymen and women who make up their ranks. And at least it's a voluntary choice to not be bound by geography.
Some of us could probably benefit from a more mobile lifestyle. Loosen things up. Not to mention seeing more of our great nation. Best of all, by travelling we can see our surroundings a little differently, by expanding our minds.
Turning travel into a full-time lifestyle isn't easy. I guess photographers could do it. In the 19th century, newspaper publishers, for instance, would try out an area, printing as few as a single issue of their publication before moving on. Entertainers, traveling troupe might also be able to make it, though a great deal of talent might be needed to make a meager living from that career choice.
Of course there will always be the greats, who can market themselves at a premium. But they are few in number indeed.