December 16, 2010

Half of what I say is meaningless

Wow, an actual person validating my own preconception:

"The whole country is now seeing the story that Michigan has been living with for a long time," said Diane Swonk, chief economist at Mesirow Financial. "We have kicked the can so far down the road that now all we have is a cliff to fall off."

"The recession merely revealed a reality that has been with us for a long time. We faced a growing gap in education and skills that we tried to fill with debt and credit, which gave us the illusion of growth."

I have long thought that the Official Story, that the "financial crisis" was itself alone responsible for our current economic disaster, was a case of whistling past the graveyard. The quote above was from a recent Reuters article which delved deeply into U.S. economic history from the 1960's to the present in a more comprehensive treatment of the origins of the American dilemma than one ordinarily encounters. ("Is America the Sick Man of the Globe?") [Note to TJR: a witty play on the old line about Turkey, huh?]

(Those are Diane's pictures, by the way, posted in her honor. Help me out on this, but I think the ring on Diane's left hand is on the middle finger, right? Just checking.)

Reuters goes into a lot of detail about the decline in American manufacturing in the decades since our economic heyday 40 to 50 years ago. At one time, for example, manufacturing accounted for 28% of our GDP; today that number is 11%. In the 1950's about 15 million Americans were employed in manufacturing, a number that has never been surpassed although the population has nearly doubled.

During Reagan's benighted reign, the graph lines representing "financialization" and "manufacturing" crossed paths, with the fast money boyz in the ascendant and the blue collar guys, the backbone of the economy, on the way out. About 40% of corporate profits now are attributable to the FIRE section (finance, insurance, real estate). It used to be that an American worker with only a high school education could nevertheless achieve a middle class standard of living for his family through the engine of American manufacturing prosperity, but those days are long gone. To keep the game going, we substituted debt in all its myriad forms - mortgages, lines of credit, credit cards, the national debt, until we reached the point that total societal debt reached 130% of total GDP. And then the entire house of cards began to teeter and, finally, to collapse.

Diane Ms. Swonk, who graduated from the University of Michigan, a fine public institution just like my own alma mater, no doubt has seen first hand the ravages of the hollowing out of the once mighty United States, the epicenter of which is in Detroit and its environs. (Ms. Swonk: if you're Googling yourself and come across this post, that's a fairly recent photograph of me taken in the subway in New York City, although I now sport a rather dapper [if I say so myself ((hey, I guess I just did!))] mustache. So try to picture...) Where was I? Okay, so the point being that...

The point being that in the face of this huge catastrophe, at last brought to full fruition, our political and media institutions are so bereft of new ideas, and so fundamentally dishonest, that they just won't face these awful truths. The weekly pep talks from Tom Friedman are a case in point. He calls for a "reset" et cetera blah blah blah, or whatever computer-tech-derived term he thinks is cool at the moment. The timeline for our recovery is always ludicrously short, as if decades of neglecting education and technological innovation (and training workers to participate in such new fields, such as alternative energy) can be remedied between his Wednesday column and his Sunday cerebro-spasm. Congress and the White House are the same way; it's all tax breaks all the time, or an extension of unemployment benefits, or a crash program to fix as many potholes in the roads as we can immediately fund. Beyond these largely empty gestures, both political parties appear to believe that solutions to real world problems can be fixed by adherence to a particular "ideology." This is so fundamentally nuts.

Without the infusion of trillions of dollars in borrowed and printed money from the federal government, the American economy would, right now, reflect the real further deterioration in our circumstances which has occurred since September of 2008. The elected leaders act as if they are doing us a favor by perpetuating the illusions of "recovery" through goosing the Dow Jones via Federal Reserve injections of fake money or dumping trillions of hallucinated largesse on the vast legions of the unemployed. Anything, anything, to avoid facing the truth. Simply keep denying the basic econo-thermodynamic laws. Never admit that those old jobs, the ones that supported the middle class of my youth (and Di-Di'sMs. Swonk's) are gone and are not coming back, and that the huge cohort of blue collar unemployed workers have no employment prospects for the future. Congress (with notable exceptions, such as Bernie Sanders) cannot admit that without admitting that in essence that economic policy in this country, for a very long time, has fundamentally betrayed the American commoner, the real worker, the foundation of our once-great economic edifice.

When you think about what is really going on, and how we got here, you can see how pathetic the "Keynesian stimulus" ideas of pundits such as Paul Krugman really are. The federal government cannot run yearly budgets of $3.6 trillion against income of about $2.2 trillion and survive forever, and anyway, returning to an economy built on an illusion will not last. I don't understand why Krugman and his ilk can't see that. They imagine that early 2007 or so was some halcyon period in American history, and if we could just get back there... Instead of seeing it for what it really was, the end of the line for a failed economic theory (the empire of debt). Even if we could re-employ all those disenfranchised folks by getting their Best Buy "sales representatives" or Wal-Mart "greeter" jobs back, it could not last, because the actual earnings of Americans (on which we are now going to have to rely) will not support the level of consumption that temporarily made such jobs possible.

These stimulus advocates propose making the situation worse as a way of making it better. Flooding the system with borrowed and printed cash is not going to lift America's educational standards from 15th in the developed world to its former competence. That would require a re-recognition that public education is a positive good, a necessity, of a functioning economy, and such a realization is nowhere to be found. Instead, the American economy will be the victim of our decades of cultural and educational neglect for years and years to come, as the ranks of the hiring pool are filled with victims of our lousy schools. You don't clear out such problems with a short-term "stimulus" jolt, no matter how many "reset" columns Tom Friedman writes. News cycles are one thing, the cycles of Reality quite another.

Sometimes I feel very alone, except for, well you know...I'm not trying to come off like Winston Smith to her Julia, and anyway, I'm not sure the Eurasian authorities will even let me talk to her at this point, but

1 comment:

  1. Machipongo John3:44 PM

    I certainly agree with you, W.S., Diane Swonk is HOT!!!