Thursday, August 20, 2015

August 20 2015. The Republicans want to kill Social Security. That would put nearly half the elderly into poverty, further stress Medicare, and doubtless kill more than a few. Sounds like a vote-winner? Meanwhile, the real issues are being little discussed. They are, so so speak, being ‘Trumped!’




Are they solvable? Yes. Individually, there is no one issue that can’t be resolved—given clear thinking and the necessary political will to change matters for the better. These are not ‘wicked problems’ like the Middle East. In fact, there are fairly obvious solutions to most of them—many of which have been implemented elsewhere. However, a small group of the ultra-rich—and those who serve them—do very well out of the status quo, so not only is clear thinking and political will rarely in evidence, but, most Americans don’t seem to be aware of the social rot that is destroying the country. They feel uneasy, but they don’t know quite why.

Is any serious attempt being made to solve them? No. In fact, they are not even being seriously discussed in any significant way. Some issues, like low pay, are being raised individually, but what is missing is a holistic approach. The dots need to be joined. 

In short, the seriousness of the problem is being disguised by a lack of appreciation of its scale. IT IS MASSIVE! This isn’t a case of one crack in a building. This is a situation where the very foundations are flawed, there are cracks all over the place, and there is the very real possibility that the whole building will come down.

Of course, economies don’t collapse like buildings. Building collapses, albeit no fun for anyone caught up in them, are relatively neat and quick. Major economic collapses—which tend to happen suddenly (and are unexpected by most) are messy, painful, tragic, and very, very nasty. They wreck lives by the million and tend to last for years. Consider the chaos that followed the collapse of the Soviet Union (and how long it lasted). Look at Greece right now. Remember the Great Recession (though the U.S. seems to be in the grip of mass amnesia).

They are a very bad thing.

This is an existential crisis, happening in plain sight, supported by abundant evidence—which is being largely ignored.

Instead, the focus is on Donald Trump and ISIS (they are well matched) or some such foolishness. As ever, distraction dominates.

Now, what does that remind me of? The 2007 Great Recession—which I forecast back in 2004, by the way. I did so, not because of the specific reasons, but because I thought the economy was fundamentally unsound in a structural sense—as a whole. It was an unsustainable system.

It still is.

Time has been bought largely by the massive support of the financial sector by the Fed (the wrong course of action implemented the wrong way) but very little has been done to correct the other weaknesses.

Did we learn anything from the Great Recession? Apparently, not much—though it is hard to imagine a clearer or more encompassing warning.

Meanwhile, the U.S. is in economic decline. At some point, it will become un-stoppable.

analysis for older households


Let me remind you of just some of the structural flaws in the U.S. economy/American Business Model. ‘Some’ is bigger than a ‘few’—but decidedly smaller than ‘all.’ It’s pretty shattering just by itself. Sometimes ‘some’ can encompass a lot.

  • RETIREMENT ISSUE. In the richest country in the world, half of Americans 55 and older have no retirement savings at all. Without Social Security, the situation would be a disaster.With it, a whole lot of people still won’t be living very well. The situation does not reflect well on the American Business Model.
  • PENSION SCHEMES UNDERFUNDED. Despite the recent stock market boom, this problem is widespread and of huge significance.
  • SHORTER LONGEVITY. Americans live sicker and die younger than the citizens of other developed nations—by two years plus. Think about the significance of that over the U.S. population of 320 million . Based of the current population alone, roughly two-thirds of a trillion years of life are being lost unnecessarily. Why?
    • The American Way of Life is insecure and stressful to excess.
    • There are serious problems with the American diet. These start with industrial farming—and its adverse consequences—continue with the dangerous practices of the food-processing industry—and culminate with what is eaten.
    • Public transport is erratic or non-existent—and there is excessive reliance on the car—all leading to inadequate exercise.
    • Air, water, and soil quality leave a great deal to be desired.
    • The healthcare system is expensive and seriously deficient. The American over-reliance on medication has the most adverse consequences.
  • WEALTH & INCOME INEQUALITY. This egregious situation is being compounded by many of the ultra-rich behaving abominably. Most seem to lack social concern.
  • SAVINGS ISSUE. Compared to the citizens of other countries, Americans don’t save. Well, some do save, but the average figure per person is disconcertingly low. Why is this:
    • Many Americans are badly paid so they don’t have the money.
    • Consumerism. Because the U.S. economy is so dependent on consumption, this is stressed to the exclusion of almost all else.
    • There aren’t enough safe incentives to promote saving.

The consequences of this failure to save adequately are serious.

  • There is a lack of investment at local level.
  • People don’t have adequate reserves.
  • People can’t afford vacations (even where they do get them).
  • People are ill-prepared for retirement.
  • LACK OF AN ADEQUATE SOCIAL SAFETY NET. The argument against a social safety net is that it discourages people from working. The evidence is to the contrary. A small minority are reluctant, but most people both want and need to work—and try very hard to do so. That said, pay and working conditions are also relevant. The downsides of not having an adequate social safety net are many, and include higher medical costs, an unwillingness to be entrepreneurial, and much human misery.
  • PERVASIVE LOW PAY. Apart from its many other negative side effects, this has given rise to major government support for many full-time workers to keep them out of poverty. This isn’t the free market in action. This is corporate welfare—and makes no sense.
  • LACK OF DEMAND. Low pay, needless to say, translates into low home market demand.
  • LACK OF GROWTH. Low home market demand plus lack of international competitiveness translates into low growth (even if international demand is buoyant).
  • LACK OF PRODUCTIVITY GROWTH. This stems from under-investment, and an under-educated and de-motivated labor force.
  • LACK OF CORPORATE INVESTMENT IN R&D, PLANT & EQUIPMENT, AND TRAINING. The money is being used for share-buybacks instead.
  • OVER-VALUED STOCK MARKET DRIVEN HEAVILY BY CORPORATE BUY-BACKS. Share buy-backs are clearly insider trading and should be illegal. They are taking place on a scale that defies credulity. We are talking misuse of money on a truly massive scale here—all to benefit a few. This is cynical and corrupt behavior.
  • EXCESSIVE INVESTMENT IN DEFENSE. This is portrayed as being necessary because the U.S. is the bastion of freedom and other free nations are not paying their share. There is some basis to that argument—the best propaganda tends to contain an element of truth—but the operative word is ‘excessive.’ This has to be combined with a corrupt Military Industrial Congressional Complex—and seven decades of overspend and a whole series of inconclusive or disastrous wars. It adds up to waste and neglect on an epic scale. The U.S. spends way too much of its resources on the wrong things.
  • WOEFULLY NEGLECTED INFRASTRUCTURE. An infrastructural deficit that runs into trillions of dollars.
  • CORPORATE TAX AVOIDANCE ON A MASSIVE SCALE. No one likes paying tax but corporations have been able to use their massive resources to rig the tax code to help them wriggle out of most of their obligations. As a consequence, corporations now contribute little more than 10 percent of the tax base—whereas in the past they provided about a third. The slack is taken up by borrowing and ordinary Americans.
  • LOSS OF INTERNATIONAL COMPETITIVENESS IN SECTOR AFTER SECTOR. The great argument in favor of squeezing Middle Class pay is that the U.S. has to be internationally competitive. Meanwhile, a whole slew of countries—who pay their workers more and work shorter hours—out-compete the U.S. And they have long vacations—and live longer. Riddle me this!
  • CARTELIZATION OF MOST DOMESTIC MARKET SECTORS. There are anti-trust laws on the books, but they aren’t enforced. As a result, most market sectors are now dominate by a handful of large corporations who, unofficially, collude. This makes a nonsense of the idea that the free market is self-regulating and policed by competition.
  • A DECLINE IN INNOVATION. Innovation is typically tracked in terms of patents—where the U.S. is, indeed suffering a decline due to underinvestment in R&D etc., but the U.S. also seems to be losing ground in other areas—such as politically. New times call for new structures, and the U.S. is not creating them. The best place to start would be with the Constitution which was intended to be updated regularly—but isn’t.
  • A DECLINE IN ENTREPRENEURIAL ACTIVITY. The U.S. is synonymous with the word ‘entrepreneur’ (though it is actually French) yet American entrepreneurship has been in decline since the 70s. There is a host of reasons for this including the facts that inadequate financing is available and the lack of a social safety net means that the consequences of taking such a risk are extremely high. 
  • A GROSSLY EXPENSIVE BUT MEDIOCRE HEALTHCARE SYSTEM. U.S. healthcare is currently at around 18 percent of GDP and will soon gobble up one fifth—or up to twice that of other nations. It is hard to overstate the damage this is doing—particularly as the results, in purely medical terms, are so disappointing.
  • AN EXPENSIVE, BUT SUBSTANDARD, K-12 EDUCATIONAL SYSTEM. We all know that education is extremely important—but have a hard time quantifying exactly what it contributes. I’m not sure we need to quantify it exactly. What I do sense is that the existence of a large—and ever-growing—underclass is undermining the economy, not to mention international competitiveness.
  • A GROSSLY EXPENSIVE THIRD LEVEL EDUCATIONAL SYSTEM. Is it a good thing to launch young graduates with the millstone of massive debt around their necks? Our international competitors seem able to avoid this—and beat us into the bargain. That should give us a hint that maybe what we are doing now is not a terribly good idea. An additional problem is that although the best of U.S. colleges and universities are excellent—and some are truly outstanding—many of the others are not, but still extremely expensive.
  • A LACK OF JOB SECURITY. Management by fear does not have a good track record.
  • A LACK OF WELL-PAID JOBS. Well-paid jobs exist because the people concerned either add considerable value (or there is some kind of restraint of trade or monopoly—as in most professions). Their relative lack suggests a worryingly negative management attitude plus a suspicion that American workers are not sufficiently well educated or trained. This does not augur well. Adding value beats cutting pay every time.
  • A LACK OF WORKER RIGHTS. This raises a basic question—which works better—carrot or stick? The evidence is that you need both, but balanced in favor of the carrot. The American system is authoritarian and stick based—and the results speak for themselves. Lack of productivity apart, a disturbing number of people of prime working age are leaving the labor force.
  • RACISM & ITS ADVERSE ECONONOMIC CONSEQUENCES ARE WIDESPREAD. The recent Great Recession hit minorities particularly hard—and they have not recovered. African American unemployment is roughly twice that of whites—and so on. Racism remains a scourge.
  • A CORPORATE CULTURE THAT LARGELY HOLDS ITS WORKERS IN CONTEMPT. The U.S. does harbor some enlightened corporations who treat their employees well. However, the prevailing ethos is authoritarian and is based upon the destructive notion that a corporation’s only obligation is to maximize shareholder value. On that basis, employees, customers, suppliers, the local community, and the National Interest, don’t count. It would be hard to find a more counter-productive philosophy—yet it is widely believed and practiced.
  • THE PAY OF MOST AMERICANS, WHEN INFLATION IS FACTORED IN, IS IN DECLINE. This is a truly insidious situation which is partly disguised by the fact that the CPI (Cost & Price Index) has been so tinkered with that it no longer affects the underlying realities.
  • THE STATISTICS ON WHICH ALL ECONOMIC DECISIONS ARE BASED ARE SUSPECT. It is very hard to make good decisions on bad data. The issue is not so much that those concerned are lying outright, but more that small changes are being made which, cumulatively yield either a flawed result—or are very difficult to compare with pervious data. As a consequence, you don’t quite know what is going on. A case in point is the inflation figure. Because the very real increases in rent (the kind that real people actually have to pay) are being reinterpreted, the official inflation figure shows up as being much lower than it actually is. Similarly, unemployment is under-counted because large numbers of people who are very much unemployed aren’t counted for technical reasons because various states don’t like paying out unemployment pay. The bottom line is that the core figures are being distorted to the confusion of the population as a whole and the detriment of the decision-making process.
  • FINANCIALIZATION IS ENTIRELY OUT OF CONTROL. A financial system is supposed to serve the economy. The U.S. economy serves the financial system—and pays a high price for so doing.
  • THE POLITICAL SYSTEM IS NOW DOMINATED BY BIG MONEY. The U.S. is no longer a democracy. It has the trappings of one, but the influence of big money is now so dominant that it has become a plutocracy—a system run the ultra-rich for their own benefit.
  • THERE HAS BEEN A MASSIVE BREAKDOWN IN TRUST IN THE U.S. Trust lubricates human interaction and enables us to get stuff done. Without it, things clog up. Where the U.S. is concerned, trust in virtually all institutions has declined precipitately, and trust in Congress is now down to single figures. The Republican party has worked hard, and successfully, to demonize government, while at the same time seeking desperately to be in government—while, then not governing very well (certainly, at federal level).It is hard to see how much can be achieved under these conditions.

The U.S. was widely admired for decades after WW II but its international image suffered severely after the Vietnam War—and has declined ever since.

As matters stand, American economic efficiency and international competiveness are undermined by a major (and sustained) misallocation of resources which are not compensated for by its other advantages (such as inexpensive energy and the innovations stemming from its major universities). The areas of excess that virtually scream out are:

  • HEALTHCARE—which is costing the U.S. up to twice that of its competitors to yield an inferior result.
  • DEFENSE—which is costing the U.S. two to three times what its competitors spend.
  • FINANCIALIZATION—where I don’t know the exact figures but which is so pervasive that it is virtually impossible to function in the U.S. without going into debt.

A rough estimate of the above figures suggests that 15 percent or more of American GDP is being spent on the wrong things—a distortion of the economy, and the quality of American life, that is so huge it cannot be compensated for.

Aspects of its economic system have been widely adopted, but they have been modified to such an extent that the American Business Model is now significantly different—and demonstrably less effective—than that practiced by its competitors.

Here, one might have expected the U.S. to learn from its rivals, and leapfrog ahead in turn, but America is being help back by:

  • IGNORANCE. Widespread ignorance of the practices, progress, and achievements of other countries.
  • CENSORED MEDIA. An ultra-rich owned—or dependent—media that fosters that ignorance, and promotes its own agenda.
  • PROPAGANDA. A cradle to the grave propaganda system based upon the myth that the U.S. Way of Life, and ways of doing things, are superior to those of other nations and, therefore the best in the world.

The evidence increasingly supports a contrary view—and it is my impression that the gap is widening.

Personally, I find all of this extremely distressing. The U.S has played a major role in my life and has largely been the source of both the opportunities I have been offered and the many adventures I have had. Beyond that, the greatest love of my life (now dead) was American, as are most of my friends (who, mostly, are very much alive)

In short, I care deeply.

Have I given up hope that this Great Nation will come to its sense? No—not quite.





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