Freedom and Responsibility
As the USA and a few other nations have devolved fitfully into economic depression, I note the absence of anyone taking responsibility for that devolution, and lots of lying to the public about recovery. The artificially propped up stock market is a bad joke, as usual tempting suckers to "invest" their hard-earned money. The true rate of unemployment undermines all claims regarding recovery, as losing the market represented by the unemployed and underemployed means profit improvements (year over year or quarter over quarter improvements are absurd deception as the comparison periods are the pits of the collapse) are coming primarily from even more cost cutting. It is time to take a serious look at where we are and how badly things have gone wrong. Then it is important to assign responsibility and to exact a toll. Freedom requires taking responsibility for actions and results, or does it? The BP oil disaster in the Gulf of Mexico is simply the latest product of unacceptable corporate behaviors. It canít be swept under the rug and following the disaster those responsible will not really be penalized. Hayward is simply moving on to another high-end position. This is wrong. Well, letís get on with the article by taking time to understand the basics of the economy first.
For most of us with education and experience it is easy to understand that no single thing is the complete cause of our economic problems, except perhaps the chronic lying, deceiving and dissembling. There has finally been a confluence of marginal, blind-sided and simply bad decisions made over many decades that have finally produced this inevitable disaster. And note that multiple nations are involved. It was simply a matter of time, and for me the perpetrators obviously were the people in control of business and governmental power, not the little people.
Most of the little people were and are ignorant, terminally so, and they are led by their noses to act with various types of psychological and financial stimulus, including their voting. They are the pawns. The players are those who created the environments and made the far-reaching decisions that have gradually but surely destroyed our economy, and piece by piece our way of life. How? By out of control socialist legislation that has picked our pockets combined with out of control capitalism that permitted our own USA based companies to flood our markets with cheaply produced foreign goods and to offshore our jobs, and through that process destroy our job market. The "economy" followed. The true results of the free trade agreements have finally been realized.
What is our "economy?" There are so many ways of defining and viewing the economy that it is easy to get lost in the definitions and functional assumption arguments just trying to understand how it all works, or in our present situation, fails to work. The process I found most informative in trying to understand capitalism in action many years ago was the aspect of velocity. So now I will digress to cover some simple definitions of key aspects of the economy. Velocity means how fast and thus how often our money changes hands in a given time interval, like a week or a month. Each time that happens people get paid and people spend and the federal government gets a chunk of the action via income and other taxes. The measure of velocity usually quoted is the GDP or gross domestic product, though in reality it is a quantity or mass, a sum of money flow, not a rate. In a high velocity environment the money changes hands many times within a month and cash flow within businesses tends to be large in both directions Ö and it is the support from large positive cash flow combined with visions for growing a business (business profits, that is Ö) that underpins our fundamental ability to employ an increasing number of people, by having business expansion. That, in turn, is critical to national success when there is an expanding population needing jobs. But does theory match reality?
If there is a large positive cash flow in a business from sales, even if expenses whittle that down to much smaller earnings, there is an apparent sound foundation to justify loaning money to that business to expand to increase sales and earnings, and, by the way, employ more people. For individuals, consistent income and demonstrated responsibility regarding paying back prior and current debt provides that same type of justification.
Beyond business health considerations, available money that can be borrowed against future earnings to grow a business is a function of how much money is available to be borrowed, and at what cost in terms of interest to be paid. That is a government function, even though the Federal Reserve is technically not part of the government. The Fed decides how much credit to give to the lending institutions, and what interest rate to charge those institutions who wish to borrow money to lend it to business and individual borrowers at a higher interest rate. It is known as the prime or interbank lending rate. Thus, the Fed controls the overall money supply and sets interest rates to stimulate or retard borrowing.
The secret of "modern" economic success is in the ability and willingness of the common people to assume debt beyond their current income to buy various of the products and services made available. The only way that truly works is if the people find themselves to be securely employed in an expanding economy complete with increasing wages or salaries that at least parallel inflation. And note that the end consumer represents about 70 percent of all USA economic activity. In turn, the repayment of debt funds most of the next round of growth, and the interest paid by consumers happens to line the pockets of the bankers/creditors quite handsomely. The process is continuous. "We are always borrowing against future earnings to fund economic growth, which is critical if populations expand." I will withhold comment at this point regarding individuals balancing debt with income and avoiding paying absurd levels of interest.
Consider what happens to economies where significant amounts of cash or cash equivalents are squirreled away, through any process. The GDP then reflects lower total mass, which reflects lower average earnings, which produces a slow economy and reduced opportunity. Cash that is reinvested, however, tends to support growth. Thus, the nature of your savings determines whether or not your money is directed towards growth of the economy. Spend all of your money and you should be considered a hero, but as we know, that is foolish, for personal financial security is too undependable. Tuck this question away for later consideration: How much of our total national wealth has found itís way into ownership by banks and large corporations, and not into the hands of the little people?
Okay, the simple definitions I provided above are true and incomplete as they lack broad topical coverage and inclusion of real life events that can impede and even destroy areas of the economy, sometimes large areas. If you visualize the entire process as a circle with cash and goods flowing continuously from different starting points in the circle and around all the subsequent consumptions and productions of cash and goods and services in a time cycle, you have an easy way of seeing how the whole process cycles cash. It is by means of that simplistic view that we can start to understand pathology in any area that can threaten the whole.
For example, if at any point in the circle cash is routinely extracted to amass wealth, then later points in the circle are provided less cash and are thus less robust. Velocity may remain high but mass (quantity of cash or cash equivalents) is reduced. Thus, if an employer wants to retain cash in the business and decides to cut costs by eliminating employees, they in turn buy less and underfund other economic activity in the current and next cycles. Then the released employees find new jobs (maybe) and life goes on. If a business expands irrationally through the use of borrowed monies, such that it canít find sufficient market demand to purchase the greater amount of goods produced, then debt doesnít get repaid in a timely manner. The employer is then pressed to reduce costs by whatever means necessary to keep the business functioning. In almost all circumstances labor is the cost most easily reduced. Interestingly, consumer debt is one factor that when out of control promises future disaster for the economy, as demand for products eventually lessens as the ability to obtain more debt is denied to the irresponsible or, depending on circumstances, unfortunate consumer. Thus, pimping products the consumer doesnít need, or pricing them to accelerate sales revenue in the present timeframe has longer term negative consequences to the economy. Of course, there is pressure on the Fed to authorize and execute the infusion of additional low interest money (funny money) to counteract out of balance income/debt. Thus we have inflation, for more money pursues the products and services and increased incomes (or extracted home equity) increase the debt load the consumer can handle without going under financially.
From the above description it is easy to derive some actual sources of our present high unemployment. One is greed that extracts cash from the circular cycle (A quick way of understanding the extent of this problem is to know who owns everything. What hard assets in the form of cash, land, buildings and equipment and materials, and especially the overall wealth they represent out of the total national wealth tells the story. Now, letís see Ö is it the little people?). Extracted wealth is money essentially removed from the circle, though it is used in part to operate and sometimes expand businesses via mergers and acquisitions. It is also used to control legislatorsí decisions via, for example, campaign contributions. Another source of unemployment is irrational assumption of large demand that when realized weakens the business and ruins the security of some or many of the employees. Some of the best examples of this situation can be found in department store chains that over purchase soft goods that customers can ignore, for any reason. Recall "Linens and Things® and Circuit City®." A few management errors in forecasting demand can lead to high and frequently permanent revolving and rewritten debt, and too often bankruptcy and a lot of subsequent unemployment. Staying in business with a high debt load demands continuous high sales, so anything that reduces consumer demand puts the business at serious risk. It is most often greed combined with irrational assumption of knowledge of the business and the market that produces that result. Of course, the ignorant consumer contributes to the problem by overspending relative to income, and the banker walks away with a smile on his face, until it all falls apart. It has fallen apart. Consider that at one time in the past thirty years the department store giant Sears & Roebuck® made more earnings from interest payments of revolving charge customers than they did in the actual sale of the products they sold. Wow, a corporate blood-sucking leach!
Today, our mortgage and credit card debt combined total about 20 trillion dollars in the USA. That is, if we assume 200 million people to be employed in normal times then each working person carries, on average, some $20,000 of personal debt. Debt from large secured purchases like automobiles adds about another $15,000 of personal debt. Debt incurred by the federal government to counteract the recent collapse of the economy, that must later be recovered through supplemental taxes, adds another $20,000 to the obligation of the working individual. The lower 50 percent of USA families earn $60,000 per year or less, which translates to about $30,000 or less per job for the top end of that scale. See the appendix link from the census folks at the end of this article to confirm the income numbers. Do you see something wrong with that picture? Do you think the other 50 percent with higher incomes have positive feelings about seeing their taxes increase? I wonder how the income to debt ratio tracks across all the families?
Think about what happens when easy credit leads ultimately to reduced demand as consumers become "tapped out" due to high interest rates and incomes that donít increase to parallel inflation. The magic word is default, and that is where we are, now in an environment of major job losses. It is no wonder the housing market is so gruesome. Who holds all the money or accounts receivables that the consumers donít have and who has the high interest income from consumer borrowing/credit/essentially permanent debt? Is a concept of fairness to the consumer valid or is it okay to raise interest rates on prior debt with no regard about harming the consumer?
Note that the GDP is a bit higher than 12 trillion dollars on an annual basis. Does that mean we have 12 trillion dollars floating around somewhere? Of course not! A single real dollar is being counted over and over Ö many times Ö each time it changes hands Ö so we donít have 12 trillion dollars or any amount remotely close to that number. How much do we have and to what extent does it cover us for all the personal and government assigned debt described above? The reality is that we canít compare the numbers with any degree of accuracy for a variety of reasons. For example, if mortgage debt, which is borrowed money, fails to be backed up with properties that are worth at least as much as the debt, then money has simply disappeared. This can happen and has happened to us via low interest money from the Fed in the early 2000ís combined with the naturally expected rise in home prices. It is called inflation. Ultimately, when the greed cycle fails, the debt remains but the properties lose and did lose significant market value. So all that value evaporated, leaving in its place only the debt. I guess we really didnít have those dollars the Fed loaned out, did we? There wasnít any constant value, so allowing the job market to fail triggered a massive loss of equity for both homeowners and lending institutions. Think of it as evaporative, hypothetical money Ö much like your "investments" in the stock market. Unfortunately, the debt doesnít evaporate, does it?
I could go on with other equally valid examples of what can go wrong with an economy, but basically it is my intent here to identify uncontrolled or unmanaged pursuit of wealth that distorts the circle. Do enough of it long enough and the circle is no longer functional or even circular. Wealth keepers and wealth optimizers function as gates that do not permit the overall mass of money flowing through the system to remain high enough to continue the employment of some of the people holding or seeking jobs, or to provide raises to counter inflation. Government attempts to ameliorate this problem with things like unemployment benefits, additional job training and economic stimulus to reduce the cost of borrowing for businesses, but underneath all else is any activity or activities that extract wealth and keep it from use by "all the people willing to work." If you consider executive compensation via stock options, it is obvious that cost reductions are every bit as essential as revenue growth to guarantee wealth for the top of the economic pyramid in any company. And offshoring is a major way that is accomplished today. Importing cheap labor is another method used, and not to the benefit of the USA citizens.
Well, "all the people willing to work" can and does in reality define a large percentage of the citizenry that is composed always of consumers but which often has a knowledge base or skill set that is utterly useless to businesses. Isnít that an interesting problem? On behalf of our businesses let me simply say that to hire the virtually useless is financial suicide, and we have no right to destroy a business simply because people want money to live. The onus is on the individual to be worth employing. Conversely, a business cannot be allowed to destroy employment opportunity for qualified people simply to increase profits at the expense of the entire nation, but this is what has happened. This set of issues turns out to be very thorny and the reality of today. Once a few companies serving particular consumer markets got the process started, all the other similar companies/competitors had to jump onboard or be severely weakened in profits. Was there any government oversight of this one-way disastrous process or itís inverted analogue of green cards for immigrants willing to work for small salaries? Did anyone try to protect our common citizens? Why not? Is government not responsible for the overall wellbeing of the citizens in providing an environment of opportunity for those willing to work hard for financial security and success?
We finally have the confluence of the economically useless, overindebted poorly paid consumer and the greedy financiers and businesses, compounded by a government compromised by the financially powerful. Add to that the reality that necessary functioning knowledge by the individual who wants to be well employed increases through time. We have exactly the opposite situation of greater numbers of less capable less educated people. We are thus on an inevitable collision course that will change everything, including our traditional concepts of democracy and capitalism. They will be relegated to the dustbin, for our economic engine is broken. Motivation is destroyed even for most of our well-intentioned common citizens.
Now lets get on with the article.
I mostly hear or read arguments completely polarized regarding individual responsibility for financial security. For example, one side looks at the lost former homeowners who had sub-prime mortgages or who lived beyond their means even with two incomes as irresponsible fools who deserve what they got. The other side looks at the greedy banks, corporations that offshored jobs and government functionaries as responsible for destroying the economy, by destroying the job market and the ability of individuals to pay their mortgages. Typically both sides of the argument are promoted or put down by tunnel vision individuals with an ax to grind. Even the so-called professionals in fields like economics and in other areas of academia canít come to any consensus about who did wrong, where we are as this debacle evolves and how to improve our "economy."
The reality of our failed economy, which has taken anywhere from thirty to over sixty years to come to full fruition, depending on your knowledge base, has produced political overtones that are very strong compared to those of better times. No one in government wants to admit to being responsible for our problems. Political polarity is now falling very strongly into two camps, consisting of what we once called conservative Republicans (now virtually all Republicans) and their close voting associates, the conservative Democrats, and the other traditional group of moderate to liberal Democrats, who are currently all being called socialists.
Our president, Barack Obama, is being derided as a complete socialist by the Republicans, who expect to capitalize on our continued poor economy to win a substantial number of additional seats in the Congress in the November elections later this year. I believe they will, and the net result will be a direct return to the policies that allowed corporations and banks to destroy the economy in the first place. We cycle between stupid socialism and out of control capitalism.
But of course, the reality of our present massive government debt and our poor economy is a burden that belongs to all the political figures that underwrote all the legislation or applied policies that contributed to the collapse of our economy. Many of those people are dead or retired. The rest are finger pointing to avoid a candid assessment of the results of their earlier decisions. One example of congressional complicity tells all ÖPolicies and legislation related to allowing and promoting major mergers and acquisitions led to one obvious, clearly understood destructive path Ö that of creating monopolies, which were the death knell to the democracy we had up until 1980. Concentrated and self-serving power disempowers the common citizens, period. But sometimes it is hard for individuals to track our present personal and government debt issues back to the real causes, like policy regarding offshoring, so we waste time and opportunity with back-stabbing instead of unraveling the real causes of our demise and correcting them.
Obamaís policies and promoted legislation, and the debt implications moving forward in time couldnít have come at a worse time, politically or economically. He will obviously be a one term president and lame duck for his last two years at that after the coming congressional elections. In an article I wrote early in 2008 I stated clearly that I would not take the job of president for any amount of money, and that I pitied Barack Obama if he was nominated and later elected as president. Why? The economy was obviously going to be a disaster that no president or Congress could turn around efficiently or effectively in any reasonably short timeframe. The power to do so was removed from them, by them, over many years, by allowing corporations/lobbyists to become too wealthy/influential, and banks to freewheel into areas like subprime mortgages and derivatives. And it took leaning on the Federal Reserve to loosen credit to give the appearance of a healthy economy around the turn of the century, a mere ten years ago. Who did that, the little people?
We are where we are thanks to "business friendly legislators" from times past and present. We are also where we are due to irresponsible socialist legislation starting with Social Security in the 1940ís. Obama is merely and sadly a sideshow, yet the yellow journalism and ugly cartoons about him attempt to lay the blame for our economic problems on him personally. But the crimes that created our economic disaster were committed, some before he was born, virtually all others before he came into any political office. Alas, nothing since his inauguration has truly reined in or punished those responsible for the demise of our economy either. Nor have our very expensive, pre-Obama military adventures borne fruit or even come close to ending, but they are a continuous creator of ever-larger debt. And who profits? And who is responsible to pay the bill?
Meanwhile the massive federal debt related to bailouts and economic stimulus and bad mortgage debt write-off support continues to expand. And entitlement program costs continue to expand. And smaller banks continue to fail at an unprecedented high rate of 100 to 150 each year. And the FDIC allows larger banks to absorb the "assets." This simply leads to banking monopolies, or more accurately, a banking oligarchy. And, in case you havenít noticed, tax revenues at local, state and national levels have declined so much that we are approaching severe cuts in services and increased tax rates for those private citizens who still own property that can be taxed. There is no clear path forward to fix the tax revenue problem without punishing the people who still have jobs and/or who still own taxable property unless the unemployment problem somehow goes away. And what, pray tell, could cause that to happen? Not government stimulus. How about a return of jobs to the USA combined with tariffs as I discussed in my book, Destiny, in the chapters dealing with Responsibilities of Businesses and Responsibilities of Governments? How about a severe reduction in entitlement and military spending?
Obamaís biggest mistake besides the healthcare plan has been failure to raise the marginal tax rate to start reining in the debt. Of course, he would have been lambasted by the Republicans for doing that also. To point, there is no action he could have taken or take in the future that will work to get us back on track towards a balanced budget with federal debt eliminated. Instead, his agenda has exacerbated our coming debt problems by adding yet more debt a.k.a. the healthcare plan. That was political suicide and about as intelligent as trying to put out a fire by throwing gasoline on it. But the most important and unarguable fact is that there will be no popular president from either established political party for at least the next ten years because of the painful decline in standard of living we will experience as the federal debt is finally addressed. If you read my article on the Future of Entitlement Programs you will understand.
As complex and far reaching as the obvious economic problems and their causative antecedent conditions are, there is missing in a glaring way any analysis or even recognition that "When a nation or groups of nations find themselves in what are ridiculous economic situations simultaneously something very fundamental has gone far wrong." What is it? That question must be answered correctly to be able to act intelligently to resolve the problems now and to avoid having them in the future.
Thus, this article is yet one more of my attempts to stand back from the trees and to once again see the forest. I will propose and discuss subjects that we are not typically hearing about in other settings Ö things that are true determinants of success or failure in any society in any period of history. Part of it is individual in nature and a larger part of it intrinsic to the whole concept of the social contract between the individual and the businesses and governments under whose control the individual lives. As you will see, it ultimately comes down to individual freedom emerging only from responsible behaviors, and especially control of the leaders, and not the reverse. I am sure you remember the quote: "Power corrupts, and absolute power corrupts absolutely." Distributed power in business and government power and responsibility returned to the citizens (massive elimination of existing legislation) are absolute requirements. Can that happen? Yes, but not without bloodshed. Letís proceed.
The wealth of a country can be measured accurately in a few very simple ways. One obvious area is food. Can the population be fed adequately from food grown within the country? Is there a rate of change in the population or in the amount of productive farm land or water supply that will negatively or positively affect the ability of the country to feed itís own people? Does any change in one or more of those factors result in ancillary abilities to increase wealth, like selling excess food to other nations, or, by superior education and comparatively low wage rates, can a country sell services to other nations to increase wealth even with expanding population (like India)? Most important, does the general populace have the opportunity to better their standard of living through education and working diligently in a healthy, shared business environment? Or are the barriers to developing any new business extremely difficult to overcome, due in part to monopolies or at least to giant competitors?
Are the means to apparent progress (and how, exactly, do we define and measure progress? Think about it.) and demographic and environmental changes sustainable or does the country create an out of balance condition by ignoring the negative impact of the activities used to create wealth? For example, the population of Egypt, which tripled in only thirty-five years from 25 million to 75 million after completion of the Aswan dam in 1956, is in real trouble. The amount of productive farmland is diminishing significantly every year due to soil salinization. That is a direct result of using manufactured fertilizers and controlled irrigation instead of the old sustainable way of having the Nile River flood the farmland annually and provide natural fertilization (silt) and natural cleansing of the soil. But initially the dam and "modern" agricultural practices yielded a great increase in the food supply and in available hydroelectric power, hence the population and accompanying national infrastructure growth. Alas, soil productivity is in serious decline now. Meanwhile, fifty plus years of silt accumulation behind the dam reduced effectiveness of the dam by decreasing water supply near the bottom of the dam to power generators to produce the bulk of the countryís electric power Ė the very silt needed for natural fertilization!
The means and changes were/are not sustainable, so wealth created in the years following the completion of the Aswan dam was actually a form of theft of wealth from the future. Thus, created wealth, misused, or in this example, poorly designed, is not wealth at all on a permanent or sustainable basis. It is thus detractive, creating far more misery later than existed prior to the change(s), as far larger populations fight economically for declining food supplies, with no practical path available to fix the created environmental problems. Breaching the dam and thus returning to old farming methods would shut down much of the modernized electricity dependent infrastructure, while most of the population would starve. Look for various types of examples of this absurd "economic" condition later in this article that have little or nothing to do with basic food or water supply. For instance, think about 20th century population growth in southern areas of California that has continuously required increased water supplies Ö in a desert area!
Some countries are fortunate to have natural resources like oil, timber or minerals and metal ores that can be sold elsewhere in the world to purchase food or other essential products to sustain the population. This form of wealth generation is, at a practical level, not sustainable, though it is easy to assume otherwise due to the "extended" time frame from initial exploitation to effective depletion. Oil wells go dry. Hardwood forests take too long to regrow. Minerals and metal ores are a constantly declining asset that eventually is gone, or at least impractical or uneconomical to obtain/process. All of the consumption of these types of products/raw materials elsewhere in the world develops non-sustainable dependencies there, while creating artificial wealth in the locations providing the products, which in turn tends to increase population in those areas. Simply consider population growth in the Middle East since the development of the oil fields following WWII.
To conclude this aspect of the discussion, the ability to feed the population of any country with food produced within the country is a very important wealth determinant, else other areas of wealth production must be diverted to purchase food every year. This condition tends to become worse through time as no nations have successfully curtailed population growth except for a very few minor examples like Japan. "Right to Life" is an anachronism in that nation of ubiquitous abortions. And in the USA fools on both sides of the abortion issue continue to debate abortion when the real answer is to control conception, globally. We either do that now or we will see famine globally as ability to grow food declines and populations unable to contribute meaningfully to the economy continue to expand, out of control.
Now it is also important to consider the access of the people to the food produced within a country or imported from other countries. Any measure of wealth produced by selling food internally or exporting food is artificial and terribly misleading if, for instance, twenty percent or more of the population is underfed or fed "alternative" food of low quality/low or unbalanced nutritional value. That situation can have multiple underlying causes, yet the net effect is to produce a drain on the nationís wealth, as the percentage of unproductive people (economically) increases the consumption of infrastructure services like education and essential medical services without providing a corresponding and equal contribution. Indeed, simply think about fast food, and the apparent permanent need for food stamps and Medicaid. How did we become an obese nation, when fifty years earlier obesity affected a very minor percentage of the population?
Where does all this lead? To be blunt, both the profit oriented production side of the equation and the unproductive diminished health resource consumption side of the equation create very out of balance non-sustainable economic, social and environmental conditions. Add that reality to your memory bank for later use in understanding the devolving economy and in relating it to the title of this article. While you are at it, consider one of my old original sayings: "I cannot be held responsible for that which I cannot control." Where does responsibility lie for the above conditions? That is not an easy question. Resolution of the problem(s) can be and will be very painful. We have yet to address resolution realistically, responsibly and fairly within our Congress and within our corporations and financial institutions. Individually most of us are too ignorant and/or misinformed to even grasp the implications of the questions.
Now lets move away from the food subject to consider other related areas relevant to the economy. The most fundamental consideration for effective commerce is that all parties obtain an essential exchange medium, product or service of higher value to them than the exchange medium, product or service they provide through exchange. It has absolutely nothing to do with capitalism, for Adam Smith was a "Johnny come lately" in the history of human commerce. It is the most essential consideration surrounding all trade since ancient tribes began the practice of commerce, which was made possible by division of labor (I hunt animals, you grow grain, he makes clothes, she cooks to feed us). I will now briefly examine the impact of commerce on the USA economy.
Prior to the 19th century, global commerce really didnít exist at a high volume practical level. That is, the lives of most of the people globally were not materially affected by the limited global commerce that existed. Regional commerce, however, had gone on for thousands of years, limited primarily by developed means of transportation, ergo boats, etc. It was the advent of the modern sailing ship that allowed nations around the globe to participate actively and in a major volume manner in the world of commerce. Imagine a pre industrial revolution world in which manual labor and local foods, fibers, minerals, etc. supported local and global commerce for much of the developed world. The USA was a minor participant; that is, the USA economy was pretty much ingrown and self-supporting, engaging only in a minor way in global commerce (cotton) and needing little in imports to be wholly successful.
That a condition of commerce isolationism prevailed, without any intent pro or con on the part of anyone, was the reality. The USA simply didnít need many products from elsewhere in the world. Our natural resources were plentiful and we had an expanding population to use them and vast areas of undeveloped land as we expanded into our western regions. We created and sustained our own markets and our own economy. We even had to import immigrants to fill the jobs created.
So, what does this meager history lesson mean in the context of the economy today? Simply this: "The USA does not actually need any trade with any nation on any basis now or into the near or distant future except for a few minerals and ores found in the western coast of South America or in Africa, with a few small but notable exceptions like coffee beans." It was that way Ö It is that way. We can be self-sustaining physically and economically anytime we so choose. We donít even need to import sugar. But our leaders in government and business have not chosen that path for various reasons. The idea that dependent international commerce trumps war is a pretty good reason (we call these things free trade agreements today as tariffs that protect local industry/workers are eliminated, and you see where that has gotten us). Wars of economic conquest well known in Asian and European history were/are stupid. The idea that exporting jobs to find lower wage rates is a really bad reason, for it undermines our economy by reducing and distorting the distribution of our personal income.
You may think I forgot about our oil consumption. I did not. Our present foreign petroleum dependency is more a matter of how many people burn it uselessly rather than any fundamental need for foreign sources of oil. Moreover, the use of oil is utterly backward in all but a few applications. Our failure to evolve obvious alternative energy technologies is nothing more or less than the control of government and business by wealthy companies who profit from retaining the old way of providing/charging for petroleum energy.
Have I lost my marbles? Have I forgotten the cold winter months in the northeastern USA? Isnít commuting a necessity due to suburban living? Quite frankly, no. The percentage of the population essential to producing and distributing essential goods and providing essential services (like medical care) is very small, perhaps 20 percent of the total work force. Heating a home that is properly insulated, that is, far in excess of local building codes, is trivial. Even schooling can be done at home using personal computers and the Internet. Created meaningless jobs cause resource consumption that is utterly unnecessary, and expanded populations on limited income now live in crowded conditions that are terribly inferior to what a lower population can have. Poor building practices increase earnings for builders in the short term and longer term for energy companies, but at what true cost to the society?
If you want a reality check, visit European cities and towns in Germany or France or Switzerland and observe the very high quality of construction for homes, apartments, businesses, etc. Then, tell me why we do not have this level of quality all over in the USA. You may then start to understand what some of the real problems are in this nation. We continue to increase demand to expand our economy with growing population, while decreasing the quality of life for those extra people as well as everyone else incapable of buying their way out of marginal living conditions. That aspect of applied capitalism here simply fails to consider practical limits to resources like land and energy, and decline in the average contributive ability of the citizenry. And where does that lead us?
There are many scary words being tossed about now Ö like the "unraveling" of the economy. Down where the rubber meets the road the only issues of concern are hunger, lack of good medical care Ö and Ö major boredom combined with cynicism regarding government and business. And it isnít a good idea to tell a recently hungry, formerly employed person that he is fundamentally meaningless to the progression of society.
I sense a revolution of major proportion if the expanding population of poor people in the USA and elsewhere is not reversed quickly. It will not be reversed without the proverbial "paradigm shift" in our perception of desirable conditions that can result only if our powerful people wake up and smell the coffee. In short, the entire concept of the economy that depends on unrestrained undirected population growth for continuance (give us ever more consumers!) is dead wrong. That era is quickly coming to an end, aided by the reality that applied technology severely reduces the number of people essential to the creation of goods for the larger population. Service economy? Give me a break!
Then again, perhaps the recent warnings from a retired colonel about creating permanent war through our existing government policies in the Middle East contains the answer, Orwellian style. That is insane.
Capitalism, overdone, has yielded the reality that much of the population is superfluous and therefore "not deserving" of high income and high quality life. Note that the value judgment part of the last sentence is based purely on economics Ö nothing more. Humanitarian considerations are simply not part of that evaluation and conclusion sequence, and frankly, they have no part in that evaluation. Well intended but myopic humanitarian efforts related to food, shelter and medical care for the "less fortunate," whether they came from government, churches, other groups or individuals, have actually produced legislation and other physical results that have exacerbated the overall problem, here and "abroad." That leads, of course, to the realization that both economically productive and non-productive people occupy the same cities, towns, etc. and many have to see each other daily. Wealth disparity is obvious. Bitterness, distrust and cynicism are also now quite obvious on all sides. Perhaps that is one of our signs of "progress."
Is it so that an accurately measured high unemployment rate of around 20 to 25 percent is simply a sign that a large percentage of the USA workforce is functionally useless to the conducting of the businesses that used to employ most of them? Or is this current depression simply like the last one, where the old jobs will come back to be populated by the same people? Or have offshoring and easy credit unwittingly become the straws that broke the economic camelís back?
I do not know how you will answer the above questions, or where your thoughts may take you regarding eventualities. One thing is certain Ö you and millions of others need to get on the stick now to do exactly that, so that you might make intelligent personal decisions about your own futures. Our present economy problems and related massive debt are producing minor civil problems now, but if left unresolved we are guaranteed to experience major civil unrest, potentially leading all the way to revolution. That seems to be impossible but it is not. It depends in part on how we decide to deal with the subjects of freedom and responsibility, which will now be addressed directly.
In a realistic world you canít provide more freedoms or perks than you earn by responsible behavior, lest the society falls apart, and ours is doing exactly that. Conversely, you canít steal most of the wealth for the few without the rest of the people, responsible and otherwise, developing deep disrespect for authority, which leads to malaise, disorder and eventually civil unrest as conditions deteriorate. Responsible common citizens who see irresponsible citizens sharing almost equally in resources (socialism) will gradually stop being responsible, for there is no motive for most of them to continue being responsible. The USA in legislative and business practices is a prime example from the mid-20th century to the present time of completely ignoring that reality. Similarly, if a common citizen capable of high education and high contribution finds serious barriers to either education (cost) or to finding a meaningful job commensurate with that education, then many of our more capable citizens also throw in the towel. That is the hardest and most dangerous reality now. Do you want to live in a world where intelligent but misdirected people can take away from you anything you acquire by hard work and responsible saving (as they obviously have), including your job? Simply think about property taxes or vehicle registration fees based on the value of the vehicle. Then think about your own inclinations towards your society if you are pulled into the destructive downward spiral of our economy. Can you tolerate that level of disrespect? Are you willing to lose all, passively, when you have done nothing wrong?
The moral example for all of us comes from the top of society, not the bottom. If our behaviors across the populace decline from considerate and respectable to strictly self-serving then that is a lesson we have learned from above. If we lack the ability to prosper in an ultra-capitalism, winner take all environment, and also visibly lose financial ground through time, we will, like any animal with a self-preservation instinct, at first retreat, and upon failure to find security, finally attack. If we have ability to prosper but find the economic environment designed to work against our prosperity, we will be forced to join the less fortunate and then attack. Alas, the final and unarguable proof that voting doesnít work to remedy our problems is seen in the continuously negative results for the common citizen through many decades as wealth continuously shifts to a small minority and freedoms (due to fear based restrictive and punitive legislation) disappear. And that minority has no moral ground from which to command and claim extreme disproportionate wealth and power, and the puppet legislators certainly do not have the right to impose government power where it ought not to be at all.
The idea is that freedom and responsibility must go hand in hand all the way up and down the society, and rewards must be commensurate with contribution to the society, not commensurate with what can be stolen, legally or illegally, at either end of the financial spectrum. If this is not our situation, and it isnít, the society has evolved to become dangerously unstable. We now resemble France before the French Revolution in economic distribution and in declining means for the normally capable and willing citizens to succeed. A quick review of French history will help you understand what will happen here if our powerful and wealthy people do not realize the inequities and reverse their behaviors.
Let me quickly summarize part of how we got to be this way. Government actively began oppressive methods in the USA starting with the personal income tax circa 1915 and the "manufactured" consent in mind control with the hype regarding our need to enter WWI. Government failed completely to address ridiculous economic expansion during the 1920ís that ultimately resulted in the Great Depression. Government made a giant leap into eventual total control of the detailed lives of all citizens with the advent of Social Security circa 1945. Since that time individual freedoms and independence have been continuously eliminated while laws at federal and state levels have become punitive for even attempting to do historically normal things, like exercising personal rights of parents in disciplining their children. The operative words are complete intrusion and control by government Ö and not to our benefit. Medicare and other so-called health insurance have become the dictators of personal health care, not our protectors, and the citizens have entirely lost control. That these changes in government have been performed in an environment of collusion with business is not even questionable. Everything is geared towards total domination of the individual. It is completely obvious to anyone who opens his eyes.
The tricky part is that many changes in the society have masked cause and effect while producing our economic disaster. The socialism has been discussed enough, and it produces drones while handing over freedom and independence to government. Another major contributor to disaster was the destruction of the nuclear family, which resulted directly from the advent of two income families and laws that permitted "Social Services" to intrude and to destroy families. The two income family was the change that, while purporting to support womenís rights, actually destroyed the home environment. You see the little people who were proponents of equal rights and equal pay couldnít see that businesses would absorb the extra labor and gradually diminish salaries and wages, such that now two incomes are mandatory to live a normal economic life. But, of course, having both people work provided and continues to provide sixteen hours or more of labor per day, not eight. Our children lost parental training and playtime and the parents lost freedom, for the home responsibilities did not magically disappear. Fatigue and anger replaced order and leisure time. Children were not nurtured, as they needed to be. The decade of the 1970ís is the time frame for major growth of both of these types of disaster, all done under the lying mantle of fairness and equal rights and government as protector of the weak.
Combine the realities of the last paragraph with the stepwise loss of financial security (and our job market) and what do you have? Succinctly, lost adults and children who have little to nothing to look forward to as they mature into adults. I now understand the logic behind the formation of gangs in tenement areas in ways I never understood before. I now support our "lazy" fat children and economically depressed adults for not giving much of a damn about anything, and also those who have eventually become adults, but only in the sense of age. All-important and essential motivations and requirements to succeed have been destroyed by government and business. And the resulting disease of malaise and lack of ambition spreads more each year to form an ever-larger percentage of our total population. Perhaps you would like to answer why guns and knives in our schools have grown to become such a serious problem.
Do we still have intelligent, educated, motivated and moral young people and adults? Sure we do. The numbers as a percent of the population, however, are small and getting smaller, for only the best can survive and prosper in our absurdly evolved country. And even the best are oppressed until and unless they acquire serious wealth to become part of the "leadership." After that, the double standard applies regarding freedom from laws and rules that impede the common citizen.
The stupidity and greed of our self-serving would-be leaders in government and business during the past 100 years has now produced obvious undeniable disaster, socially, environmentally and economically. Donít let those fools cause you to pick on each other, or to point to the results of their inferior decisions and claim the results as the causes of our disasters, ergo the mostly useless, highly consumptive citizenry.
Freedom within the larger society and Responsibility to the larger society? The "leaders" best learn the latter or they will lose the former violently. I donít want to live to see that happen, but I wouldnít bet on it now looking at our rate of moral as well as economic decline.
Link to Earnings Table:
Here is a recent article you may want to read Ö it was published some days after I provided my article to you. It takes a look at a few financial myths presently being hyped as truth that are used to boost the stock market.