We Did This To Ourselves by George Wolke
George Wolke has been a friend of mine since High School. That means I've know him for more the 30 years. We are basically on the same side of the political spectrum but we disagree on a number of issues. He wrote me an e-mail yesterday after my e-mail and this article was the result. George is an electrical engineer working in the civilian defense industry.
We Did This To Ourselves
As I was driving to work this morning, I received a one line email from my friend Frank DeMartini entitled, ‘The Unemployment Rate’.
It read, “It’s at 10.2%....Need I say more….”
For the past several months, Frank and I have gone back and forth about the merits of the Stimulus Package, and of Kensyean Economics in general. After considering how lucky I am to not be a member of this rather unfortunate club, I wrote the following as a response to Frank. Please take a look and let’s talk about it.
The situation we have today is the confluence of several events which have created ‘the perfect storm’. If this were a ‘normal’ recession, we’d see the unemployment rate bottom out and then return to the normal 4-5% range. Unfortunately, I think what we’re going to see is a jobless recovery and the further destruction of the middle class.
1. We no longer build things. As Frank is so apt to point out, we cannot compete against other countries whos standard of living is below ours. This makes it impossible for company’s to invest in manufacturing in America unless state or local governments sweeten the pie though incentives. Even with this, the era of American Manufacturing is over. And with it the blue collar jobs that helped to create our middle class.
2. Power is more concentrated than it ever has been before. The disparity between the top and the bottom has never been wider. And those in power are going to do everything they can to distort the message to the masses in order to stay in power.
3. As a people, we have no appetite for long term thinking. This is the single most reason we are hosed. Wall Street DEMANDS quarter by quarter financial gains at the expense of long term investment. Multi-million dollar bonuses for creating wealth though debt. The idea that housing prices will never go down. Need I say any more?
We are hosed and there is nothing in the short term that is going to make it better. But let me ask you what you think we can do to improve the situation? In the 30’s it took FDR to create the CCC to get people back to work, and then WWII to turn the economy around.
I bet if you asked the millions who just can’t find jobs, they’d jump at the chance to do anything productive at this point. But are we as a country ready to accept that there is going to need to be a dramatic reduction in the standard of living in order to create new jobs? To think otherwise seems a folly to me. It’s a fact that not everyone is capable of invention. That’s why we need to build things!!!!
Now, maybe we ought to be investing money in ways that encourages new industries to emerge. But these things take LOTS of money and lots of time to develop. What to do in the meantime?
There are no easy answers anymore. But, what needs to happen before we get this economy back on track is for people to get back to work. But, the catch-22 is that we won’t get people back to work until inventories are depleted, but….WE DON’T BUILD ANYTHING ANYMORE….plus, who can afford to buy anything anyway?
© 2009 by George Wolke. All rights reserved. Use by Permission.
Labels: Economy, Frank DeMartini, George Wolke, recession, Stimulus, Unemployment
posted by Frank T. DeMartini @ 8:47 AM
4 Comments:
When George wrote me this e-mail, I asked him if I could print it. He gave me permission.
My response to him was that I agree with him in principle on a number of issues herein. However, one particularly needs explaining.
I shoot most of my movies in foreign countries because I cannot afford to shoot them here. It is much cheaper even with the travel costs. I want to make movies here, but the market forces do not allow it. I cannot make them cheap enough here to guarantee a break even to my investors. This is true even with tax incentives in states such as Michigan, Louisiana and the Carolinas.
Unfortunately, this is also the case with the entire manufacturing sector. The American consumer wants product cheap and is not willing to pay more. So clothing, consumer electronics, movies, etc., are manufactured outside of the country. Nothing is going to change this.
George is correct, we need to make stuff. Does that mean that labor cost must go down and the standard of living must go down. I don't have an answer to this question.
However, there is one item of stimulus that I and many Republicans would vote for. Let's look to the 60's and start spending money on NASA and the Space Program. In the 60's it was a source of many things, among them, national pride, jobs and innovation.
What do you all think?
If we want to start manufacturing things again the first thing that needs to go are the unions. Time after time their unreasonable demands force industry to either close or move to another country. I'm all for workers rights but in todays world we need to be able to compete with countries like China, India and Korea. We know whats wrong we just need to have the balls to fix it. Good article George.
The government trying to mico-managing things is what causes all the problems. That goes for the Unions too. If the government wasn't involved with them they would be so powerful! We need to establish some ground rules!!!
1. The government CAN NOT create a job!
2. The government has NO MONEY!!! They can only print it, borrow it, or take it away from someone who already has it!!!! In this transaction what did the poor bastard that was robbed by the IRS get in return? a good or service???? NO nothing so what would Kensyean say about that. Consumption? I say it's thievery and a negative on the economy.
Lets just go back to the constitution Limited Government!!! Make, MAKE people take care of their selves.
Where would we be if 80% of the federal budget was given back to the people. Where would I standard of living be then? Pretty good I think.
Great discussion!!!
Economic climates are based upon perception of value, trust in others (including the government), committed contactual agreements and confidence in the future. This is not an uncontrollable force like the weather. Our troubled economic times are the result of excessive power granted to too few people, specifically government and unions which now appear to be a single entity for practical purposes. Under conservative leadership, things could turn for the better real fast. But right now, that can't happen because the "few" are in power and intend to take it to the next level via a vision of world government disguised as "Cap and Trade". People will not be very productive or reach their potential if they think their efforts will go unrewarded or their wealth will be redistributed. That is a fundamental truth of human nature.
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