I think we’re on the verge of a very long economic contraction. I think we have pretty much eaten our seed corn and are going to have many long cold winters ahead.
For many years, American businesses have relied as much on cost-cutting as they have on actual innovation and market expansion. There has been a steady drip-drip-drip of wealth being transferred from workers to shareholders. Whether via the on-going down-grading of working conditions (glamorous Manhattan offices to low-cost suburban-sprawl office parks, offices and desks to cubicles, lunches at nearby eateries to sandwiches at the desk, etc.), the slashing of financial compensation to workers (loss of pensions, loss of healthcare coverage, loss of wage increases), or just the introduction of numerous productivity enhancers (PCs/e-mail, cel phones, Nextel radios, etc.), the overall trend has been to squeeze value from workers – value that gets reflected in the company’s “performance.”
The problem with cost-cutting-as-growth is that it cannot go on forever. I heard a phrase a while ago that really stuck in my mind: “things that cannot go on forever don’t.” And I think we’re finding out the hard truth of that right now. American businesses can’t find much more to cut. There’s no place cheaper than rural China to out-source to. Low-cost reporters, paralegals and engineers in India are getting scarce. We already have our workers in cheap metal buildings with shaky heat/A/C. Businesses have gone to this well for likely the last time for quite some time.
So businesses must rely on innovation and market expansion for growth. But the problem is that it cannot come up with new products successfully. Besides making somewhat faster and cheaper laptops, what is Dell going to do? Sell TV’s? Refrigerators (see Blockbuster to Buy Circuit City)? The dread “service contracts”?
In considering what will our businesses do, we’re all inclined to think that through sheer power of will, good old American pluck, and a little bit of luck, we’ll pull through. After all, we’ve been slogging along for some time OK, and we’ve been OK. Plus, we’re optimistic people and tend to think things will work out OK just because it’s how we view the world. That doesn’t mean, however, that the world is going to conform to our perceptions of it.
We have spent that last 25 or more years squandering our future – a future that I believe is arriving now. We have decided to starve our government half-to-death, so that the majority of our social problems have as their root cause lack of adequate resources. I take this drive to “cut taxes” as another part of the general trend of transferring wealth from those with less (i.e., consumers of governmental services) to those with more (those who would otherwise be paying for those services).
We’ve gotten the idea into our heads that those with great wealth deserve every last penny of it, and have no real obligation to the rest of society. Reagan-Bush economic theory is that the more we give the best-off, the better off everyone else is. This is just plain wrong, but it’s easy to see why millionaires promote it as a serious political-economic philosophy.
We’ve failed to invest adequately in our education system, and now are falling behind because of it. We’ve failed to invest in our health, and are reaping the rewards in an epidemic of obesity and other treatable and preventable diseases and conditions. We have failed to invest in technology that would allow us to throw off oil dependency when it becomes no longer affordable.
We have weakened our governmental and public infrastructure so much that it will simply not be available to help its citizens when most needed. It will be years before our governments can be wrestled out of the hands of the super-rich and returned to the control of the majority of voters.
We have borrowed massively to pay for things we have merely consumed. It’s one thing to borrow $1,000,000 to build a factory. But to borrow $1,000,000 to pay for a huge picnic is quite another. And far too much of our borrowing has been for picnics, not enough for factories.
Perhaps worst of all, we have abandoned our sense of community. Ronald Reagan began the job of killing it when he announced that the relevant question is “are you better off today than you were 4 years ago.” He appealed to the divisions in our society, using fear of others as the basis for his politics. Wealthy people had always used some version of this “divide and conquer” approach, and Reagan breathed new life into it. He also ushered in an era when substance no longer mattered on any level, and hastened the “juvenilization” of our public discourse.
These same people have worked hard to ensure that America is isolated in the world. Americans have little interest in helping other nations. Americans have little interest in other nations, period. We’ve once again retreated to the castle keep and pulled up the drawbridges, hoping the world will leave us alone.
Our ability to be part of a meaningful community has been obliterated – taking away the one thing that Americans might otherwise use to weather the coming storm and make a better future.
For years, wags have warned that we were mortgaging our future. As a society, we mostly ignored these warnings. I think that the future is now, the bill is due, and we just don’t have the money to pay it.
I have hope that Sen. Obama will ascend to our leadership and be our generation’s FDR. But remember FDR didn’t make the crisis go away, he just helped us cope with it. And the crisis didn't end for 15 years -- and even then only following a catastrophic war.