Friday, January 3, 2014


The media excel at giving us news in digestible bites without context and without explaining the implications of a given development. This isn’t to say that the information isn’t there, but all too often you need a pick-ax, a miners lamp, considerable stamina, and a ridiculous expenditure of time to get it.

Does this mean: (1) They are too lazy? (2) They think we are too dumb to understand? (3) They are equally clueless?

Frankly, I don’t know the answer—though I suspect all three factors come into play—but I am convinced that this approach is damaging to the National Interest. Essentially, it allows deeply serious  developments to take place without appropriate counteractions being initiated.

Growth in the economy is a case in point. Again and again, we are told that U.S. growth is primarily consumer driven—at around 70 percent—but we are virtually never told where the remaining 30 percent comes from—or how we stand in relation to other countries. Also, it is rarely explained that GDP is a thoroughly lousy way to express the progress of an economy—particularly in relation to quality of life—and what measurements might work better (see Joseph Stiglitz’s work on this matter).

Instead, the whole issue is reported on as if it was a sports result in a blur of sports results. As a consequence, significant data is rendered near meaningless. In effect, though technically we are being informed, we are actually being dumbed down—and we, to our eternal shame, and despite evidence that this is so, accept this.

Are we being dumbed down deliberately? I think a number of factors come into play here—but certainly one element concerns the reality that it is in some people’s interests to keep the bulk of the American population as ignorant as possible—without appearing to do so. The ignorant are easier to manipulate; and manipulation, for both political and commercial reasons (Is there a difference?) underpins our culture.

Technically—the politics are another matter—it should be relatively easy to put together a scorecard which would help vastly more people understand and follow our economy—and thus support the need for some fundamental reforms (it’s something you could test on a before and after basis). However, the media don’t seem to want to do it—for reasons we should think about—and our politicians have evolved to the stage of being near criminally irresponsible when it comes to making use of data. They twist, they distort, they invent, they reject, and they lie like—well—politicians. They have rendered the truth near irrelevant. Since effective policies should be evidence-based as much as possible, this habit of dismissing evidence in favor of ideology is no small problem. 

So who does that leave? That leaves a substantial number of blogs—some excellent—which offer fragmentary data and still don’t add up to the critical mass required to help educate a population.

It’s quite a conundrum because meanwhile some terrible things are continuing to happen to the U.S. economy, and the American Way of Life ,which we could prevent, or ameliorate, if only we were more aware—and understood.

An obvious way to see how badly we are doing in relation to other developed nations would be to compare a range of data on a regular basis. Do we do that in a structured way? No. In fact, Americans are kept quite remarkably ignorant of the performance of other nations—unless the news about them is bad. Then the media gloat—and so do we. It feels good to feel superior.

We’re not Greece or Spain, we say to ourselves. No, we’re not—and we’re not Northern Europe either (unfortunately, in terms of the economic wellbeing of most Americans).

Across a range of metrics, feeling superior is about all we can achieve. In reality we are losing ground to a degree that is frightening. In fact, we lag in almost every area that counts—except militarily. We are the strongest nation in the world—with a disconcerting habit of losing wars at vast cost in blood and treasure to ourselves (let alone our supposed enemies).

We know that—at least to some extent—but it does not move us. We are not indifferent. It’s more that we feel helpless.

Grrr! I’m pretty damn sure we are not helpless—but I’m still thinking. Meanwhile, let me explain what else drives growth (the fabled “engines of growth”). Here I’m using the Federal Reserve’s definition (which, in my opinion, could be improved upon significantly).

  • I = Investment
  • G = Government purchases of goods and services
  • NX = Net exports

So what is the significance of all that?

That’s really my point. If you don’t know how bad the situation is, history—as they say—will roll over you. And history (though fascinating)has a tendency to be less than kind. Let me comment briefly. This is an important subject that really needs more clarification—but this is a blog, not a book..

I = Investment

Investment today—providing it yields a return—yields tomorrow’s growth. However, if your focus is primarily on your stock price and next quarter’s results (because you are primarily incentivized through stock options), you don’t really care about the longer term. You are more interested in buying back your shares, or other forms of financial speculation. As a consequence, U.S. business has been under-investing for decades. The consequences of that are plain to be seen—particularly in the decline of the well-paid job.

G = Government

Advocates of austerity consistently fail to distinguish between consumption and investment. Trimming government consumption may well be a good thing (though not in a recession) but cutting back on investment over decades is a disaster. Look at the state of our infrastructure right now. What we have is crumbling. We are living off the past—off the foresight of our ancestors. We will need to spend trillions of dollars to catch up.

NX = Net Exports

A good way to think about our trade deficit is to appreciate that it equates to exporting jobs. When you appreciate that the U.S. has been in deficit since about 1980—a third of a century, hard to believe though that may be—the scale of the problem can be appreciated. We’ve paid for it by printing money—which we can do because the dollar is a reserve currency. However, there is still a price to be paid in terms of the debasement of the purchasing power of the dollar—better known as inflation.

When you add in the fact that consumer expenditure is in trouble—earning power for most people is actually declining—it is worth asking the fundamental questions: Where is future growth coming from? Is growth the way we should judge the health of our economy? Does it really matter if we are ignorant of all this stuff? Is there anything we can do to put things right?

There is actually a great deal we can do to put things right. Remaining ignorant isn’t one of them.






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