Tuesday, January 19, 2010

And Another Thing

I've said before on this blog that I think the underlying economic crisis is far more serious than the "financial" crisis. Long-term economic woes can persist for some time without causing any kind of crisis -- an occasion for noticing and hopefully dealing with the underlying woes. The recent financial crisis -- itself a sort of underlying woe triggered into crisis by the catalyst of the collapse of the housing market -- will be seen down the line as a catalyst of a larger economic crisis.

I have written previously that:

Another undesirable consequence of Wall St.'s demands is that it starves society of research and development.... [A] lot of companies don't have any R&D strategy, so they riff on the products they already have, they move those products into new markets, and they buy-out the competition. Plus, there's always moving work to lower-cost markets and otherwise depriving workers and suppliers of any available pennies in order to make the firm look like it's growing.

This all points to a serious crisis in the world's economy. We have faced and rebounded somewhat from last year's financial crisis. But we have yet to face and rebound from the underlying economic crisis that continues to worsen. I believe that the current downturn shares this feature with the Great Depression.

We exited the Great Depression by providing work to every man and woman we could get our hands on. We came out of the war with enough technological innovation to support a couple of decades worth of improving products and services.

I don't see any such deus ex machina on the horizon, and so don't see any basis to suppose that the long-term decline in our standard of living is going to be reversed any time soon.

While many companies are in fact engines of growth and innovation, it's hard to conclude that the large majority are. We are living at the beginning of a long period of slow-decline -- not entirely a bad thing, to the extent it allows others to climb out of terrible poverty -- and sadly, most Americans are completely unaware of what's been done to them for the last 40 years.

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