October 25, 2012

The Dismal Science

Economics really needs some Steampunk, some Tesla, some Zeppelins.
Trying to read about and understand what is going on in our economy is frustrating, exhausting, and BORING. It is also really, really important. And a whole lot of the complicated double-talk and seeming contradictions being thrown around are designed to make you run screaming back to LOL cats despairing of ever understanding what is going on.
I am not an economist or a historian. I do pay attention to history, and the past couple of decades has looked a lot like the free-for-all that was going on among the rich and powerful during the early part of the last century. With predictable results.
Now there are lots of folks to tell me that I just don't understand how complex the current economy has become, how different the world is than it was in 1929, etc. Granted. So I look to some folks with a lot more on the ball than myself to see what they think. And guess what?
Some interesting reading for those interested in having more information on how the heck we got here.

Elizabeth Warren Interview

Contrary Brin

Please, let us recall that President Obama inherited an economy in free-fall. He did NOT cause it, although amusingly he was being accused of same even before he was moved into the White House!
I personally thought he was insane for wanting what was probably going to be a pretty thankless job. Just ask poor Herbert Hoover about that one!

Okay - so maybe we have a bit of a handle on the problem. What is the solution?
Unsurprisingly, simply voting for candidate A, B or writing in Mickey Mouse (again) is not going to fix everything and bring a golden age of prosperity.
Getting someone in office who is willing to make hard choices that will help rebuild the middle class, rather than simply enriching the already wealthy is a good start.

1 comment:

Rhianon Jameson said...

As a practitioner of the Dismal Science (though I disagree with Carlyle that the subject deserves the sobriquet - "Realistic Science" might be a better term, as many of the important insights are really little more than efforts toward having politicians and citizens alike to face the unavoidable tradeoffs in life), I don't find the subject boring - though God knows almost everyone else does.

The conventional wisdom is that the middle class has had a hard time of it over the past n years. I'm not sure that's true. Forget the recent past - say, 2006 to the present - and look at the growth of the middle class over the past, say, thirty or forty years. There's more of us, enjoying higher (real) incomes, and enjoying a higher standard of living than previous generations.

Of course, the past half-decade or more has been tough. The recession was deep, and this recovery has been terrible by historical standards. Reasonable people can disagree about why. It's clear that the President inherited a difficult situation, but it's not clear that he made it better.

Here's a Dismal prediction for you, though: no matter who is in the White House for the next four years, things won't really get much better. Some policies will be better than others, but we need to get used to having less than we used to. There are a lot of reasons for this, but consider two: first, the government made unsustainable promises to citizens - Social Security, Medicare. For years, a growing population and increasing productivity masked this, but now the working-age population isn't increasing rapidly and productivity gains have leveled off. Our parents were able to consume more than they otherwise would have been because they could rely on a comfortable retirement, paid for partly by their own contributions but paid for in large part by the next generation. Similarly, in the past decade, government deficits have been out of control. (Again, you can argue that some deficit spending was better than others, but it's clear that these deficits can't be sustained forever. Just wait until interest rates go up - the payments on the debt will skyrocket.) That's allowed generous transfers and significant spending on government programs to continue even while tax rates went down, with the same result: people got to consume more than they can in the future.

I see a tough future for the country. And that's a prediction I would be delighted to be wrong about.