WHEN RESEARCHING THE U.S. ECONOMY—AND I AM NOW IN MY 11TH YEAR—I FIND I KEEP ON ENCOUNTERING THE USUAL SUSPECTS WHICH PREVENT THE U.S FROM DOING NEARLY AS WELL AS IT COULD
MY FEELING IS THAT ALL ARE GUILTY—BUT SOME MAY BE GUILTIER THAN OTHERS.
The research continues…I’m getting there!
My underlying thesis is that the current U.S. decline (a reality for all too many Americans, whatever the statistics say) is preventable. That is the good news.
But will it be prevented? As matters stand, it seems unlikely. There is not even wide awareness of the issues. That is the depressing reality.
Let me line up a few of the villains. Well, maybe more than a few—more a selection. As is so often the case, the list is not complete—but it may get you thinking (and pretty much everything starts with a thought—I think.
If a meteorite falls on you, I guess that is just an accident).
Thinking about thinking can be confusing. Fortunately, writing cures all.
It is worth appreciating that the fact that the U.S. economy is growing at all—and that highly suspect rate is very far from impressive—is only achieved because of ever increasing debt at all levels (federal, state, local, corporate and private) combined with near zero interest rates from the Federal Reserve—and a budget deficit.
It is not healthy organic growth based upon adding value and competing internationally with success.
In fact, the U.S. hasn’t balanced its trade for decades—despite being globally dominant in high value areas like defense and aviation.
By and large, it isn’t investment-based growth either (although investment plays a role). But, primarily it is growth based upon a disturbingly large increase in debt combined with one of the longest periods of virtually interest-free credit from the Federal Reserve in U.S. history.
To compound that unsatisfactory situation, most of the gains stemming from that growth have accrued to the ultra-rich—yet again.
In short, growth is an entirely inadequate guide to the overall health of an economy—let alone the economic wellbeing of the average American. It can also take place for both good and bad reasons. It is a false god—yet it is the one most worshipped. It is such an easy figure to quote—because surely everyone understands growth?
But, the irony is that they don’t—or even close. But, it works at some level as a ‘feel-good’ figure. Politicians and CEOs can tout it as evidence that the U.S. is doing better than other developed countries (by and large, it isn’t) even though the tangible benefits of such growth remain ever elusive.
It is also worth noting that the U.S.’s level of debt at federal level is only possible because the dollar is a reserve currency. If that situation is ever seriously challenged, then interest rates will increase and the economic outlook will be grim indeed.
A reserve currency is one which is widely used for settling debts—and thus is in international demand. Oil, for instance, is priced in dollars—as are many other commodities and products.
But is the dollar’s status as a reserve currency likely to be challenged?
Yes, it is. The euro was eroding the dollar’ reserve status until recently—and may again. And the Chinese seem to be heading strategically in that direction—and they are certain to succeed, to at least some extent, within the next decade.
The current privileged position of the dollar—which allows the U.S. to print money on demand without adverse consequences—could evaporate very quickly. Devastating financial contagion—typically stemming from a loss in confidence (and not always for rational reasons)—can spread virtually overnight. Sentiment is nothing if not fickle.
The terms used to describe the Usual Suspects overlap to some extent—and some are subsets of others--but I doubt that will be too confusing.
- A MASSIVE BREAKDOWN OF TRUST IN THE U.S. Since some degree of trust underpins all human cooperation, this widespread breakdown has very serious implications. It stems from a long series of disappointments in how the U.S. is run (the Vietnam War being just one example)combined with a very deliberate, and highly successful, Right Wing campaign to demonize government. The end result is a country with a serious shortfall in what is known as ‘Social Capital.’ It’s a tragedy.
- EXCESSIVE MONETIZATION OF JUST ABOUT EVERYTHING. This has to do with culture and values. Money and profit are fine and necessary things—but they are very far from the only things. Money plays an overly dominant role in the U.S. and concepts like the public good get short shrift.
- THE DOMINANCE OF PROPAGANDA. If people don’t know what they need to know because propaganda is crowding out good information, then they can’t come to reasonable conclusions—and democracy cannot function effectively. Currently, it clearly doesn’t.
- A SERIOUSLY OUT OF DATE CONSTITUTION. Corporations are not people. Money isn’t speech. Gender equality should be written into the Constitution. All in all, the Constitution is seriously and disastrously out of date—and the ultra-rich have learned to game it to their personal advantage.
- AN EXCESSIVELY PRO-BUSINESS SUPREME COURT. A court that so consistently favors one side over another loses credibility.
- CORRUPTION OF THE POLITICAL SYSTEM. This corruption runs very deep. It starts with attempts to restrict voting, and otherwise distort the elections and continues right through the system. Crucially, it means that politicians only listen to donors. Gerrymandering means that only a minority of seats are seriously in play. You could a make a strong case that a better system would be just to be select candidates at random.
- THE LACK OF A NATIONAL ECONOMIC STRATEGY. Countries that know where they are going have a better track record than those which don’t. A National Economic Strategy doesn’t mean a government dictates everything—let alone does everything. It simply means that after much consultation, certain common goals are agreed—which then influence policy decisions.
- A DISTORTED AND GROSSLY UNFAIR TAXATION SYSTEM. The U.S. rich pay a lower percentage than those with lesser incomes. The corporate contribution to the tax bases has declined significantly over the decades. This is a rigged system—and it discriminates in favor of the ultra-rich and against the interests of most Americans.
- CORPORATIZATION. Corporate power is clearly and blatantly excessive. Corporations, themselves, are becoming increasingly monopolistic. The anti-trust laws, along with many other regulations, are not being enforced.
- FINANCIALIZATION. Every country needs a financial system—but it should be there to serve the economy, not as an end in itself. The U.S. system has become such a self-serving end—and is a dominant element in the economic system as well. It is highly predatory and destructive.
- THE AMERICAN BUSINESS MODEL AND ITS FOCUS ON MAXIMIZING SHAREHOLDER VALUE TO THE EXCLUSION OF ALL ELSE. I have written about this extensively elsewhere. It is proving to be a disastrous ethos because apart from its tendency to promote short-termism, it is fairly obvious that employees, customers, suppliers the community and the National Interest should be considered as well. The fact that they are not beggars belief.
- CORPORATE SHORT-TERMISM. This has so many negative consequences it is hard to know where to begin. One involves share-buybacks to boost the share price instead of investing in the real economy.
- UNDERINVESTMENT IN TRAINING, RESEARCH, PLANT & EQUIPMENT. The scale is huge and the consequences here are catastrophic.
- UNDERINVESTMENT IN INFRASTRUCTURE. This already costs each and every American a great deal of money—and the consequences are only going to get worse.
- UNDERINVESTMENT IN THE ARTS AND ON CREATIVITY GENERALLY. This is a more important thing than you might think because creativity makes such a significant contribution to the quality of our lives.
- ENTIRELY INADEQUATE EMPLOYEE RIGHTS. The alarming thing is that employees are still continuing to lose ground. The fact that labor force participation is dropping suggests that many workers feel the game is not worth the candle.Research shows that few American employees are actively engaged by their jobs. To quote the title of an excellent book on the subject: “The Way We Are Working Isn’t Working.”
- AUTHORITARIANISM BY MANAGEMENT. If workers have few rights, and the unions have been rendered largely irrelevant, then there is nothing to stop managements being authoritarian. They are just that.
- A WIDESPREAD LACK OF SOCIAL CONCERN. Based upon the legislative climate, Americans seem remarkably unconcerned about the plight of their fellow citizens. That may be more the fault of the system than individuals—though that is hard to determine. Respect for the myth of rugged individualism runs deep—as does resentment of the poor who are seen as unwilling to work (regardless of the evidence to the contrary). Either way, a consequence is an ever rising underclass—and a vast amount of preventable human misery. It’s a serious problem.