http://www.thedailybeast.com/blogs-and-stories/2010-04-22/sorry-were-still-doomed/full/#Don't believe the good-news pundits who say America's economy is coming back. Reihan Salam says we're heading into a decade-long economic buzz saw.
America's economic gloom is lifting! The market for pessimism has bottomed out! Daniel Gross of Newsweek and Slate and Mike Dorning of Bloomberg BusinessWeek have written big features celebrating the comeback of the U.S. economy, and at least some people are buying it, not to mention buying piles of shiny new consumer goods.
Last week J.P. Morgan issued a report making the case that the global upturn has legs thanks to an increase in business spending and hiring. Strong growth in emerging markets is fueling global demand. Global inventory restocking hasn't even begun to take off. Corporate earnings for U.S. firms are surging. Despite a few cautionary notes, one gets the impression that Wall Street fully expects a sustained recovery. It helps that the stock market is steadily climbing, and average hourly wages and aggregate weekly hours are climbing as well, a sign that more employment gains are on the way. Big mass-market retailers, many of which had succumbed to wrist-slashing despair as recently as a year ago, are reporting stronger earnings. And on Good Morning America, Treasury Secretary Tim Geithner declared Thursday morning that the economy is “absolutely stronger,” pointing to sizzling gains in the technology sector and solid growth in manufacturing.
So the worst is behind us, right? Nope, not by a longshot.
Click the link for the full article.
However, the most important part of the article is this:
We are propping up the most rotten sectors of the economy and diverting talent that would otherwise shift into the new interrelated systems that are slowly emerging—and this emergence will prove very slow indeed once the inevitable tax burden required to prop up aging yet politically powerful sectors hits. One can hope, like Gross, that those new commercial infrastructures and industrial ecosystems that propel growth will take shape here at home. They could just as easily emerge in China or India or, for that matter, Canada, a country that has pursued more sustainable fiscal policies.
We've been preventing
creative destruction.
Companies need to fail. Well, that's not quite right.
We need companies to fail. Companies fail because they are not best utilizing their resources. When companies fail, the resources they have been using are now freed to be used elsewhere. This is what spurs growth. We're are preventing that. By propping up failed companies like GM we prevent their resources from being used for something else.
What that something else is I don't know. I do know they will use the resources better than GM or else they will go out of business as well.
Worse than that, we've turned our economy into a
zero-sum game. The economy was positive sum (and likely is still so,
mostly.) Now, using the government to support cronies, those companies that "win" with government support win at the cost of something else. Usually we do not know what that something else is, which is a serious problem. In fact this is the basic problem of economics:
What is seen and what is unseen.
Unfortunately, at least 40% of the people in this country cannot look beyond what is seen. My guess is this is the legacy of our public school system's failure to teach children
how to think due to their focus on
what to think.
Our day of reckoning is coming from our willful disregard of easily foreseeable consequences. My only question is whether we will face up to them now or try to push it off so that our children will suffer. "At least we'll have it good while I'm here!"
Indeed I tremble for my country when I reflect that God is just and that His Justice cannot sleep for ever.
