C’mon Americans, the Fed dropped its rate to .25%! Let’s all ogle the stock market while it wanks off to this latest move that’s sure to be as awesomely effective as every other adorable widdle wate cut.
Actually, .25% is something to behold. Does that even cover the paperwork? Soon I hope to see the Fed giving away money to institutions so they’ll take more money and do… whatever it is that they’re supposed to do with this money that will immediately return us to a state of eternal economic growth. Sports eyewear stores and pet psychiatrists everywhere anxiously await the return of our all-consuming consumerism.
The prickly pear that sticks me about the state of the US economy is that America doesn’t really do anything. Sure, we’ve got the movie industry, a lot of IT companies, and a whole buttload of lawyers to export, but these are not the underpinnings of a sound economy. Americans with capital have been trying to flip stocks and real estate monthly, weekly, daily or hourly to turn profit into more profit via financial shell games instead of trying to build or invest in the building of something useful. Even the ping-pong state of the stock market over the last few months has partly resulted from traders trying to get in and out of stocks at just the right moment to squeeze a few extra pennies out of every one of their remaining dollars. I fail to see how rate cuts will do anything about our compulsive need to avoid doing anything useful.
Then again, as long as we value economic growth as the end-all be-all of life, we’ll always wind up in predicaments like this. Growth is inherently unsustainable, at least at the rates maintained in the US over the last several years. There simply won’t be enough new ways to add real value being created fast enough, so to keep profits and stocks and bank accounts rising, people and institutions will eventually have to turn to destructive short-term practices like flipping real estate and swapping huge blocks of loans like baseball cards.
Maybe we need to stop racing ourselves to the fictional finish line.
Person to person, Americans need to stop competing with each other to spend the most money on the latest obnoxious Christmas toys or own the hugest house with the most unused rooms or have the most megapixels on the block or sport the softest leather seats in the latest Lexus model. All these pursuits do is drive businesses to step all over each other to create and then cram the trendiest useless crap down our throats. It infects our children with the disease of material addiction. It makes the immediate acquisition of wealth at unreasonable rates everyone’s goal. Everyone likes new stuff, but it’s the rate and scale of consumption that’s out of whack. It doesn’t make a single person happier or more complete and, in the end, nobody else gives a shit what you own.
Business to business, we need to stop chasing quarterly earnings. The need to show massive improvements to the bottom line 4 times a year has led directly to nearly all of our devastating economic embarrassments, from Enron to Worldcom to the financial meltdown. We need to stop trying to figure out how to trick people into buying more shit they don’t need and instead offer products that are as useful as they are responsible. And if a critical industry can’t sustain itself profitably, like airlines, health care, and so forth, then let’s all share in the ownership by nationalizing them. Because, in the end, nearly everyone (I said *nearly*) associated with a gigantic clusterfuck regrets it for the rest of his/her life.
Alternatively, we can continue trampling each other in Wal-Marts to help a broken system destroy lives at home and abroad until it finally dies an exceptionally violent death. Sup to you.
How would you measure doing something? I for one think American businesses do a lot, at least as much as other developed countries. All the technological progress Americans have made is what I would consider doing something. We’ve got a crapload of tech companies, look at the computing sector for example. We’ve got a crapload of companies that manufacture things that are useful like cars, medical equipment, planes, etc.
I think as long as new technology is not created, then growth is unsustainable. The fact of the matter is there hasn’t been a real technological development in this decade. In the 90′s the rise of the computer contributed to better economy. What do we have presently? What new technology do we have?
But is the US really the leader in any particular technological field now? And to what end?
I question whether our cars (especially our cars) or planes or medical tech are at the top of the pyramid, and I certainly think the short-term way we approach business precludes them from staying there.
Our rate of growth requires an unreasonable rate of new discovery and change. If we all just took a deep breath and slowed down, not only would we be happier and less greedy, we’d actually be able to assess our impact on things like the environment.
Awesome post. More, pls.
That’s pretty much true, because of the shortsighted decisionmaking imposed by the earnings news cycle. Making companies answerable to shareholders worked very well when shareholders were a relatively small group of people who owned stock for years or decades at a time. It works not at all when everyone is a daytrader (which I assume is the point of your headline) Not coincidentally, that’s the same problem afflicting decisions made by election-conscious politicians. Which in turn is why this notion is insane:
If an industry can’t sustain itself profitably, then one of two things are true. Either it’s a buggywhip industry and should die a natural death, or its current business model is unsustainable and its labor and capital need to be reorganized.
What our current problems prove is that capitalism isn’t magic, and idiots can screw up a private company just like they can screw up a government program. The difference is that the private company once screwed up will die, the incompetents will be unemployed and the valuable assets, and workers, will ultimately be taken up by another, better-managed, private company. Government is inherently incapable of doing this.
We do have a hearty agricultural system, to be fair, even if it’s for shit and run by giant corporations instead of diversified into smaller farms that would be more responsible. I do agree with you that there’s an uneasy shell game going on with our economy, especially how so many jobs are service sector jobs. People waiting on each other is not an economy. It’s a shell game.
Stacy, where you’re wrong is you’re assuming that government and business have the same motivations and goal when they take ownership over part of the economy. Government doesn’t have to turn a profit if they own health care, and that’s a good thing. Part of our problem is we do want government owned businesses to be profitable, but if we got out of that mindset, it might make them better organizations. What if we used Amtrack as a way to move the country towards public transportation that would save the environment, even if we had to run in the red to do it? Wouldn’t that be a worthy goal?
Actually I assume the exact opposite. Private business has one and only one motive – to turn a profit. Whatever process they invent to try to ensure that goal, it’s ultimately tested against the bottom line. Government programs have the motive to produce metrics that please their overseers, which is similar but lacks that ultimate bottom-line test. Government can’t go out of business, so it can and does bumble along forever even if it fails on every front.
It’s pretty well accepted that democratic government tends toward myopic decisionmaking because politicians have no incentive to think beyond the next election cycle. I really do think the basic problem with the economy is that the short-term trading mentality combined with devotion to earnings reports brought the same shortsightedness to big business. How could more government involvement possibly make that better??
I do more or less agree that a service economy is ultimately a shell game. Professional services do have the potential to create wealth by getting the greatest efficiency out of all work that’s done, so it’s not totally fair to characterize it as “people waiting on each other”. It could certainly devolve to that point though, as anyone who works in business consulting could tell you.
Bureaucracies have their own problems, but they are not typically subject to election cycles. Most administrative bureaucracies are fairly immune to election politics, actually, because they continue to function relatively the same regardless of who is in office. Bush was the most disruptive to agencies like the EPA and the FDA and whatnot, but that’s not generally the case.
Bureaucracies are more like non-profits, and that’s much more attractive in industries that don’t require massive innovation — like health care. I’ve worked in a large one before for quite some time, and while it was slow, it generally had the right interests at heart because the kind of people attracted to that work are not typically profit seekers themselves.
And Amanda, you make my point for me on our agricultural industry. Sure, we have the resources to be an incredible agricultural economy, even more than we already are. But Big Ag has completely effed up the system. It’s producing substandard quality products that don’t compete with the best stuff out there because it’s technically good for the profit margins in the short term. It’s like an ideal example of how we do everything wrong, largely because of profit impatience.
punkassmarc:
In some fields we are definitely. Software is an easy example that comes to mind. The U.S. is clearly a leader here and what’s more software profits are extremely high. Just look at Google, Microsoft, Apple, Adobe, Pixar (technically Apple I guess), IBM, so on and so forth. In fact in the computer industry Americans lead. The biggest suppliers of microprocessors are American Companies (Intel has over 70% of the Market and AMD in second place makes up the rest). Then there’s Texas Instruments, IBM (they make microprocessors for all major console manufacturers, on top of a crap load of research), etc. However, all of this overshadows a larger issue pertinent to your question, which is – Does the U.S. have to lead? Other developed countries are doing well, without necessarily being leaders in every field. Even countries that aren’t as developed have plenty of money (look at Arab countries for example, they’ve got money because they’ve got oil, or resources).
I’ve got a real problem with short term thinking myself, so I agree that short term thinking creates plenty of problems.
Maybe. I can’t predict either way here. I know that without technological improvements the economy will stagnate. Technology drives economies. But in the short term, I think there will be no technological products that will drive the economy. For starters there’s energy tech. Clearly we need to move away from our current energy sources. That’s going to help boost our economy. Then there’s robot tech. We’re already selling this now, but it’ll be more of a force in 10 years. People within the industry (cars and robots and academia) our predicting that’s when we’ll probably see the first robotic cars (cars that drive themselves). That’s going to boost the economy. Bio engineering is always going to be big, because there are always bio problems to solve. New medical tech, then will always be created. Space tech is going to increase as a result of needs for better communications. There’s more, but that’s what I thought of off the top of my head. My overall conjecture is that as long as their are problems, someone will create technology to solve it. That’s a theory though.
punkassmarc:
Well, our cars certainly haven’t been were they could be. Things are looking better however. I think the Volt is an example of this. As far as planes are concerned, they’re really only two manufacturers of planes (commercially speaking, military planes are not really the concern I don’t think). Boeing and Airbus, of which Boeing is the bigger. Boeing I think has a leg up on Airbus with their new 787 Dreamliner. A lot of Airlines have chosen the Dreamliner because it’s more fuel efficient. I can’t comment on whether we lead or not in medical tech other than that’s what my general perception would be (I don’t know for sure, but in light of our booming drug industry I would think that we may lead).
Boeing is really a fantastic air manufacturer; I think the “planes” comment was more in regards to who’s running the airlines. And the fact of the matter is, American airlines just suck. They are the worst run industry in the US (and possibly the world). And yes, I am including the “We lose 2,000 dollars on every car we sell” automotive industry.
With the exception of few airlines (Southwest does alright, as does a few regional) airlines have been making “profit” by getting tax money flown into them, because god forbid we either a) nationalize them or b) let them get taken over by foreign companies.
Antigone you’re probably right about the planes comment. My mistake.
Yep.