The economy has changed dramatically over the last year or two. Predictive tools seems to be either too narrow in their focus or too broad in their results. Economists who sought to read between the lines in previous years (before 2008) are now hedging any and all comments to address the possibilities and not the probabilities. Can we understand risk if even the most sage economists barely afford a guess that might be wrong? Or right?
I’m not blaming anyone. In truth, how can you? A passenger on a moving train cannot hope to predict or even plan for the possibility of whether an accident might happen somewhere down the tracks. Nor can the engineer of the train predict the outcome of such an accident that could happen to the passengers in back. Are we headed for some sort of disaster or are we destined to arrive safely?
To follow the economy with any success, one has to look forward and back, to see not only where we are headed but what influences have brought us to this point in time. The passing landscape tells no tales but at the same time, tells no truths either. Let’s look at some of the events that got us to this point and determine whether they can be fixed.
Perhaps the most sustaining message ever put forth by the Republicans is that, if we tried hard enough and made the right choices, we could be much more than we are today. Their land of opportunity pitch appeals to everyone who thinks that if they can just get over this hump and free themselves from their own economic adversity, they too can be rich, wealthy and without the worries they are currently experiencing.
Perhaps the most sustaining message ever put forth from the Democrats was the simple idea that if you failed to realize the Republican dream, they would be there to catch as you fall. The belief that not everyone will experience the land of opportunity scenario has led to a vast social safety net. And where would be without it?
In the land of opportunity, no one is average. In the land of missed opportunity, everyone is. In the land of opportunity, the corner office, the outsized paycheck and residency in the top tier of income earners is assured through lower taxes, smaller government and reduced regulations. In the land of missed opportunity, smart folks realize that the top is indeed rarified air and those who reside their have absolutely no intentions of sharing a single breath. In the land of missed opportunity, we also want lower taxes, smaller government and instead of reduced regulations, boundaries for ethical behavior.
Everyone in America shares the exact same goals: to be able to afford a place to live, a job that pays enough to sustain them and the ability to be able to enjoy some portion of their day. But we have an economy that is reluctant to provide a place to live at an affordable rate, fails to supply adequate employment that makes you feel as though you might have the opportunity to get ahead, and because of that, the ability to enjoy, even the simplest of pleasures in no longer there.
Yet, everyone in America also shares the same dreams: to be able to afford more house than they need, to earn more than they currently do and to be able to afford more leisure time in an expanded workweek. But we have an economy that is reluctant to make those dreams come true for all but a few, keeps your employment at the edge of enough and too much, and dangles the luxury of enjoyment like a carrot on a stick.
I use the word economy in the broadest sense. Far too many folks believe that a single indicator is proof of a direction to do otherwise. Equities rebound and therefore, so should the economy. Housing rebounds and therefore, so should the economy. Yield curves, deficits and stimulus provide impetus and therefore, the economy improves. Consumer confidence, creditworthiness, and debt all move in disjointed directions but each are tied to the same indication of recovery. But ask the average person where they are and they will suggest that they are perhaps two to three paychecks away from financial ruin.
So what is the average person telling us than none of us hear? That private equity has not done what the Republicans have suggested it would do. The government stimulus from the Democrats has not done what they hoped it would do in a timely enough fashion. And the consumer is still judging their prosperity by the ability to spend.
Perhaps it is time to think of ourselves as something other than consumers. To be labeled as such makes us nothing more than spenders. We buy and the economy recovers. Why then, are we held accountable for the risk we take while no other business, banks, private and publicly held companies, do the same?
Perhaps the best way to approach the new economy, and that is what we actually have here folks, is to become skeptical. Why buy if we cannot be assured that the money spent will take a circular path? If we can’t be convinced that what we are purchasing is actually ending up back in our economy via a job for the worker who produced it who in turn, puts it back into the economy via yet another job, why should we concern ourselves with any purchase at all?
We have no convincing evidence that this is happening. Businesses will suggest they must make a profit in order to satisfy the ever-demanding shareholder. But what they fail to assume that we are somehow of our own mindset, that we want to see more money put back into this economy and not spent on the world stage?
Now that sounds vaguely like a protectionist attitude and in some ways it is. Yet American business has not convinced us that they care about us as a whole. I spend a lot of time suggesting that we all invest more. But that might not be enough to fix what is broken. In fact, it might even feed the beast.
Saving more would certainly offer a wake-up call and would go a long way to making the economy understand that we are not simply part of the mechanism; we are the mechanism.
So if everyone is right and wrong about the economy, if everyone wants the same thing, why don’t we simply act as self-centered individuals who ask the question: what’s in it for me? The answer will eventually trickle down to more for all of us who are asking the same question. We can look for financial indicators and predict where the economy is headed all day long. But until we redefine ourselves, no one will understand.
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