By Kevin M
Unemployment ticked down in November for the first time in many months, some of the big banks have announced plans to pay back TARP money given to them early in the financial crisis and Wall Street is on the rise—a classic recovery is underway!
Or is it?
Before you think of this as a gloom-and-doom post, please read through to the end and you’ll see it’s anything but.
I’ll agree that there’s a clear uptrend in many near term indicators, but I doubt that’s the real story. Economists and many politicians and industry leaders are understandably anxious to trumpet any sign of good news, anything that will get us past the gloom of the moment. But that focus seems to be notoriously short sighted.
We may be moving toward some sort of end of this recession, but my take is that the recent financial crisis is a symptom of bigger problems, and does not represent the crisis itself. We can cure this recession but never deal with the longer term issues that caused it in the first place, and as a result, we can expect more of the same very soon.
The longer term issues are my primary inspiration for choosing to establish OutOfYourRut.com. I don’t believe that many of the problems we’re facing are temporary, and changes in our attitudes and actions in regard to careers, money and many things that have nothing to do with either, will have to take place in the coming years.
As a nation, and even as a world, I believe we’re in a deeper rut than most of us can accept. While we look to collective policy changes to bring us through the transition, it is at least as much our responsibility as individuals as it is a matter of national policy. Probably much more.
The trends shaping the future
I’m claiming no access to a crystal ball here, but I think we can make some reliable projections about where things will go in the next ten to twenty years based on very definite trends that have become entrenched in the past decade or two. We can’t know for certain what will happen in the future, but in order to prepare for that future we need to have some understanding of how things are reasonably likely to play out. The only way to do that with any degree of certainty is to look at the underlying trends already in motion.
Rather than focusing on the recent financial crisis and the attendant recession, let’s review some trends which have been in motion over at least the past 10 years, and hazard some reasonable guesses about the future that an ordinary person without a degree in economics can make, whether the economy recovers or continues in an impaired state in the short run:
- The cost of the most things will continue to rise; the most important ones will rise faster.
- Big companies will continue to swallow up smaller ones.
- Large companies will continue to reduce payrolls in the attempt to achieve/preserve/increase profitability. You will be affected by this even if you’re self employed because an unemployed worker is an impaired customer.
- Companies and industries will continue to shift jobs to lower cost overseas locations.
- Advancing technology will create, redefine and eliminate jobs and industries.
- Foreign competition is here to stay, and in certain industries that competition will have advantages we can’t match.
- There is a wave humanity moving between countries that dwarfs the settlement of- and migration to- the Americas between 1500 and 1900, and it’s affecting everything.
- Money and capital are flowing all around the world and are no respecters of national borders. Punitive actions by one country against a company will result only in it’s migration to another.
- Technology is accelerating the pace of everyday life.
- Information and communications are flooding the world, extending, enhancing and even corrupting the content we receive.
- The cost of both healthcare and pensions are rising at unsustainable levels.
- World systems are becoming more intertwined and interdependent to a degree that’s poorly understood.
Proof in the news stories that don’t make the front page
In a recent Bloomberg article Volcker Says ‘Basic Structure’ of Economy to Impede U.S. Growth, former Federal Reserve Chairman Paul Volcker, said,
“…imbalances in the structure of the U.S. economy pose a bigger challenge than the financial crisis and will impede economic growth for some time. “We have another economic problem which is mixed up in this of too much consumption, too much spending relative to our capacity to invest and to export. It’s involved with the financial crisis but in a way it’s more difficult than the financial crisis because it reflects the basic structure of the economy.”
Note the emphasis on the basic structure of the economy; worldwide government policies flooding the world and the banks with money have done nothing to change the basic structure—and problems—of the world’s economies. Adding debt and printing money will assure that the first trend listed above—rising prices—will continue into the future, adding even more stress.
This policy continues even with the economy showing at least some signs of life. Last week, in recognition of a $12.1 trillion debt by the end of 2009, Congress is poised to raise the U.S. national debt limit by an additional $1.8 trillion, in line with borrowing expectations for 2010. That would put the cumulative national debt at about $14 trillion one year from now, or roughly equal to the size of the country’s total gross domestic product.
No matter what happy spin might be put on that development, the fact that we need to borrow that much money just to keep the ship afloat is not an encouraging sign.
At the very same time, Spain is courting a 19% unemployment rate going into the holiday season. Meanwhile, the national credit ratings not only of Spain, but also of Greece, Ireland and Portugal have been downgraded by the credit agencies this year, and further downgrades are expected. Governments have gotten quite comfortable borrowing what their nations cannot earn and pay for, and that trend shows no sign of reversing.
In case we might be tempted to dismiss these as “foreign problems” it is a fact that we are no longer insulated from the troubles of other nations. In order to avoid a domino affect, the countries in relatively better financial shape will be faced with the choice to either pony up money to moderate crisis in these counties, thus adding to already large debt positions, or to let them collapse and see how that plays out. There are no longer any island nations in the world, not even the United States.
I’m not nearly the first person to declare this, but the post World War II order is deteriorating, and we’re moving quickly into its uncertain aftermath. Many, perhaps most people see these developments as problems that need to be solved and often attempt to do so by politicizing them in an attempt to create a more favorable outcome or to stop them entirely.
Let me suggest that this is probably a complete waste of time and creative energy. These are shifts of historic proportions and are not subject to the whim of politics or legal constraint. Efforts to contain or reverse them will be little more than the proverbial finger in the dike.
Taking the High Road
So if I’m right in what I’m projecting, what course of action do we choose to deal with it?
For the foreseeable future, “security” of any sort is likely to be an elusive commodity. I think then it boils down to eight basic steps:
- Broaden our income sources,
- Spend less money,
- Save more money,
- Eliminate debt,
- Reach out to more people, even if they don’t look like us, act like us or even speak our language,
- Take better care of ourselves,
- Draw closer to our faith, families, friends and communities, and
- Change our attitudes to embrace change rather than to resist it.
These steps are simple in concept, yet revolutionary in application.
As much as we might like to look to the system for salvation from our economic woes, the ultimate solution is truly staring back at us in the mirror.
Most of the structural economic problems we face are being made worse by attempts to defend the status quo from change. But if the status quo were so successful, it wouldn’t need to be defended. Resisting change is expending negative energy; far better to recognize change, understand it, embrace it and make the trend our friend. Only then can we begin to create a positive future.
As individuals, we can and must accept this challenge. Governments, industries and various other institutions ARE The System, and systems are self-defensive in nature. It is unlikely that we will be able to rely on any of these in making the shift to the new reality more pleasant or positive. However, in this the age of the internet, advancing technology and the virtual global flow of people, money, industry, information and ideas, we each possess unparalleled opportunity to advance our own lives and communities, even if the bureaucracies dig in and resist.
Investigate the ten part series on this site, Ten Ways to Survive a Down Economy, for tactical suggestions from this little corner of the blogosphere.
And going forward, ignore the hype and the headlines, study the trends, and make a concious decision to prosper!
What do you think? Am I looking in the right direction here, or am I all wet? If I’m right, what are some ways you can offer to deal with the trends unfolding before us?