Economies Are Like Cars, Some Get Totaled
February 19, 2011
A friend sent me an email this morning that I think sums up pretty accurately what we’re facing and how detached from reality most of the media and it’s talking heads are.
I know there may be some don’t-spook-the-peasants motivation in the apparent avoidance of public honesty regarding the economic situation of the US these day, but there also might be a bit of let’s-not-start-a-class-war concern simmering underneath too. Look at the media response to what’s happening in Wisconsin —at least some media. Fox even has Glenn Beck blaming the Anti-Christ for the anger of Wisconsin labor at Governor Walker’s attempt to wipe-out his state’s unions once and for all —Jeez! Beck may be the anti-Christ if one is open to such belief and the evidence of the man’s Satanic wackiness.
As usual, it takes an enlightened average citizen to get to the truth, that’s why I can’t pass up the chance to share my friend’s very smart and insightful letter to columnist David Brooks.
Dale told me he was watching Brooks on NPR and reacted to Brooks optimistic outlook of our situation and, well, didn’t agree with the pundit. Although he didn’t give me a lot of detail, here’s the scene I imagined:
Dale, incredulous, is shaking his fist at Brooks’ TV head, wondering what planet Brooks was living on. So, he emailed him in a sudden fit of pessimism (which today is a symptom of realist brilliance).
I’m sure Dale was aware that emailing Brooks was only a self-medicating excercise to calm himself down. Brooks is Brooks after all —a well-known brand, and changing branding in midstream is always risky, so the old aphorism goes. So my friend probably doesn’t expect to hear Brooks copping to a change of heart any time soon.
But the letter’s a good one, loaded with realism, and a worthy read for the incredulous in the face of corporately-funded talking heads. Without further ado, here’s Dale’s letter:
On the 5Feb11 NewsHours you opined a la Reinhart and Rogoff that post-financial crises unemployment shocks “can last 6, 7, 8 years.”And this presumes, obviously, that the current downturn is cyclical and thus, based upon an historical review of past crises, an eventual upturn can be predicted, albeit a lengthy and perhaps painful process. I very much disagree and here is why: unlike in the past there are now no economic engines available to drive such recovery.
Economies are like cars. Sure, you can crash them and smash them and then take them to your mechanic and body shop and pretty soon you will be back on the road “good as new” or maybe even better. But that’s not the happy scenario when you “total” your car, because in which scenario, Even all the King’s mechanics and all the Kings body shops can not….
Analogously, I believe that the 2008 crash brought us so close to the brink not so much because of unregulated Wall St. greed , etc., but because it betrayed the systemic text book reality that true economic recovery and eventual return to “good as new” prosperity, unlike the phony, easy debt-driven “Home Equity = ATM Machine, Housing Boom recovery from the 2000 Dot.com debacle, can be driven only by the broad-based renewal and increase of productivity. And that is where the US economy is Capital “T” Totaled.
If you’ll embrace my thesis for the civility of argument, I’m sure you yourself can think of a dozen reason why this “Totaling” might be true, such as “The Great Sucking Sound, ” peak oil, unprecedented competition from China and India and the U.S. government being hobbled by astronomical debt service. But to my mind, it is the chilling, “Shiver me timbers,” disconnect between corporate profits and domestic job creation that tolls the non-cyclical death knell.
I mean the index breaks 12000 for the first time since 2008 because corporate profits are doing so well and the unemployment rate does not respond with any attributable decrease whatsoever! Rather it continues to insistently stagnate near 10% (and who knows the real number, some claim it’s closer to 20%!) —talk about, “What’s wrong with this picture?! And the moribund 36,000 jobs created by the US economy this January past insults the credulity of even the most bullishly optimistic “America on the Mend'” Pollyanna.
Evidently Reinhart and Rogoff must be such die-heart “cyclo-philes” (single-minded lovers of the cyclical paradigm) that they never bothered to read the very non-cyclical, “never good as new again,” bad news contained in Kennedy’s “The Rise and Fall of Great Powers.”
So let me ask you straightforwardly, David, according to your cyclical scenario, what will our economy’s literal “deus ex machina” be this time around, that Holy-Grail -sipping Great God of Innovation? Are we seriously so naive, nay, deluded as to believe that the Chinese, now awash in cash and on their historic rise will just sit on their “yuans” and let us Americans out innovate them into the 21st Century?
Case in point: I live in Massachusetts and Marlboro-based Evergreen Solar’s 800 jobs are now just a “great sucking sound” on slow boat to China still echoing throughout the state; a reverberation, I might add, that sardonically mocks our designation as a “Commonwealth.” So the upshot is that we’ll now be buying our newly innovated solar panels from China. Terrific!
No, David, I sincerely believe that you’ve got it wrong this time. The American Empire’s economic suzerainty ” Ist kaput!” And it ain’t coming back. So America’s only real and viable option at this historical tipping point and this historic turning point is a radical paradigm shift in our values, consumption patterns and lifestyle.
And most unfortunately I am not aware of any historical precedent where same has ever been brought about but by crisis and imposed necessity.
Shelburne Falls, MA
Feb. 18, 2011