Archive for June 17th, 2010
Having been bearish on the US debt and bubble ridden economy for about 15 years, and having argued against interventionism and foreign policy activism for even longer, my views seem to have been vindicated by recent events. The US economy finally showed itself to be unsustainable, and the effort to “spread democracy” and follow a neo-conservative dream of creating a world conducive to American values proved to be a pie in the sky fantasy.
Psychologically people get locked into thinking about things a certain way. We avoid cognitive dissonance, we find ways to support our world views. I don’t want to be a knee jerk “bear.” Now we see the problems; now people can make changes. For the first time in well over a decade I’m starting to think the future might indeed be better than the past.
I already wrote a post about how to maintain US influence in world affairs. So far, the late Bush and early Obama Administrations have started down a path that leads us in the right direction. The more difficult problem is the economy, and unsustainable debt. The dire scenarios being discussed could turn out to be just as wrong as the “new economy” fantasies were during the recent bubbles. Here’s why:
1. Tight credit has helped shift public habits from increasing debt to finally starting to save again. In the short term this seems like a bad thing since saving does not stimulate an economy in need of a jump start. However, this also represents a necessary change in habits if we are to rebuild a sustainable economy. People may be coming out of their delusional consumerist fog, and that’s a good thing.
2. We’re all in this together — the world economy has been hurt by high debt and bubble induced crises. Even those relatively well off, such as China, need stability. While such crises can create conflict, they also can inspire new levels of international cooperation, and right now world leaders seem more disposed to cooperation than conflict — an improvement over 2003-04 when it appeared that undercutting the US had become a goal for middle powers.
3. The BP disaster should push us even harder towards a post-petroleum economy. Ever since the first energy crisis and President Nixon’s hope for energy independence, we’ve only given lip service to a desire to wean ourselves from oil. Now the cost of our addiction includes not only foreign wars, terrorism, and recession, but also visible and long term environmental damage to a major coast line — something which could easily happen again if deep water drilling continues. This event has caused me to prepare for a major investment in changing how I heat my home. I may not get off oil completely, but it’s suddenly worth it both economically and morally to change how I live.
Beyond that, technological development of alternative energy sources is growing quickly. Vastly more efficient solar panels, geothermal energy, wind turbines are being produced. In the last four years the idea of a quick shift in energy sources has gone from being seen as virtually inconceivable to at least being in the realm of possibility. If this continues, the oil era may come to an end sooner rather than later, and could help stimulate a new economic boom. This also could do more than any treaty in curtailing the emission of green house gases into the atmosphere, and make it possible to avoid the worst aspects of global warming. In the past I thought the oil addiction was simply too hard to break, that we were facing an almost certain energy crisis which could last decades and spawn and global depression. Now I’m starting to think that won’t be the case, that we can make the leap to new energy sources.
4. Pragmatism (examples: Obama and Brown). Right now Obama’s approval ratings remain slightly below 50% (with at least 10-15% coming from the left). People are dissatisfied with the present, and that spells trouble for the party in power. So far, however, Obama has steered a rather pragmatic course and has tried to avoid ideological warfare. And for all the noise made by the so-called “tea party” folk who fantasize that we can “return the government of the founders,” the most successful Republicans have been people like Scott Brown of Massachusetts, who also tries to be pragmatic and avoid ideological war. Though Obama is on the left and Brown on the right, and thus they have different perspectives, if the pragmatic middle can come forth in both parties we might see a capacity to solve problems. If it becomes the far left vs. the far right — Olberman vs. Beck — then the country could go into gridlock and decline.
My hope is that in the 2010 elections the pragmatic middle ends up out performing the ideologues in both parties, signaling that extremism doesn’t win, and we can get the two sides to work together and solve problems. I actually think the American people are wise enough to send that message. Both the elections of Obama nation wide and Brown in Massachusetts were designed to make that clear; let’s hope the politicians are listening.
5. A new vision of government. The financial crisis and BP disaster show that you can’t rely on markets or de-regulation to magically make everything better. We need effective government, regulation and rule of law. On the other hand, the demographic time bomb faced by social security, medicare, and the health care system show that government programs cannot magically make everything better either. We need to limit bureaucracy and cut government spending. It’s not “return to the founders” vs. “embrace socialism.” Instead, we need to rethink how government functions and make sure it addresses 21st century problems effectively.
To me that means rethinking all government programs and spending, with no sacred cows. Whether it is military spending, social security, higher education or aid to children, everything should be analyzed, assessed, and we should ask “can we do this cheaper.” I think we can. I don’t think we’re getting our money’s worth out of how much the government spends — there isn’t only waste, but also a lot of unneeded, ineffective spending going on. We’re still prosperous and creative enough to maintain a solid standard of living if we can avoid a severe collapse caused by heavy debt.
The tax code needs overhauled as well; there are too many breaks for the wealthy, too much of if has been written by big business, and it’s finally time for something like a “progressive fair tax” that is more effective and can generate increased revenue. It’s best to do that not by increasing current tax rates, but by rethinking the tax structure so people who now avoid taxes find it harder to do so.
There are two obstacles to changing our vision of governance. One is the power of special interests, groups that like aspects of the current system and have the political clout and power to try to protect their particular programs. The other obstacles is ideological thinking — those who rely on abstract “principles” that don’t work in practice like they are supposed to in theory. Whether from hard core socialists or adamant libertarians, ideology-driven thinking is irrational in that it ignores reality in favor of simplified interpretations of how the world ‘should’ work.
6. Spiritual rejuvenation. I’m not talking religion here, but a shift away from a crass focus on consumption and “consumerism” towards a recognition that life is not just about our material condition, but has meaning at a deeper level. The spiritual connection may be social (family, community), religious, connected to nature or the arts, or simply a recognition that life has a spiritual purpose. Without spiritual rejuvenation we doom ourselves to an anxiety-ridden quest to prove our worth through consumption, and that’s driven the oil and debt addiction as much as anything else.
There’s always been a disconnect between my personal optimism for every day life and my predictions of economic/political gloom and doom. Now that people see the problems that were being ignored for so long, I’m becoming optimistic that we can build a better global. There are dangers ahead and the most difficult part is yet to come. But perhaps the 21st century will when we the oil era recedes, technology and global cooperation starts to yield hope for the third world, and we build a sustainable economy where material consumption is no longer seen as the reason we’re here.