I had hoped that some good would have come from the economic collapse that began in late 2008. Finally, I thought, following more than a decade of cleverly-engineered asset bubbles designed to obscur the underlying fault lines in our economy, there will be some real soul-searching by politicians and economists alike about how their darling model of globalization could have yielded such a colosal failure.
We came close. Amid all the headline-grabbing stories about mortgage-backed securities, ratings agency failures and loose lending standards, the G20 group of nations recognized that it was really global trade imbalances that lay at the heart of the matter, creating huge imbalances in currency reserves that fed these hare-brained investment schemes and papered over the stark reality that the U.S. was being bankrupted. Fixing our trade issues became a common theme among Democratic candidates in 2008 and, once elected, Obama seemed to put the world on notice that time was short for them to boost their imports of American goods and rebalance the global economy.
But that’s where it ended. The stimulus plan gave the economy a little adrenaline boost. The Fed chipped in and fired up the printing press. And other matters like Iraq, Afghanistan, health care and the president’s place of birth took center stage. Unemployment fell a little and the economy added a few jobs. The global trade imbalances that nearly collapsed the global economy, while as bad as ever, faded to the back page.
Per capita employment remains mired at its recession lows. Real income steadily declines. Barely more than half of all college graduates of the past three years are employed. Housing starts are at record low levels. Housing prices continue to decline. And what has the president done about it? Secured a few non-binding agreements to boost imports of American products. Set a goal of doubling exports in five years – not much of a stretch, considering that we started from a recession-depressed level. And little else. The economy has settled into what some economists are beginning to call “the new normal.”
So I expected that, by now, Republican candidates would be making hay of the president’s inaction on jobs and maybe even trade. But, aside from whack-job Trump, none has uttered a peep. All of the debate has returned to what seem to be the only two pre-recession issues that a politician can debate – taxes and spending. It’s as though The Great Recession never happened. Actuallly, it’s as though it were 1980 again and the trade deficit never happened. Hell, I can’t even find a serious Republican contender for the nomination who’s tough on illegal immigration. So, while I’m disappointed with Obama’s performance on these issues, you’ll forgive me for not getting on a Republican bandwagon yet.
I suppose it’s good that the national debt is getting so much attention, since it’s an unsustainable situation. But let’s face it, while tackling the debt burden in a serious way is going to be good for the economy in the long run, it will have terrible negative consequences for the economy for years to come. Anything that takes money out of the economy – which paying down the debt (or even slowing its growth) – will do, is a drag on the economy. Ultimately, though, the rates at which we tax and spend have little effect. Spending more than we collect in revenue may give the economy a short-term boost, but ultimately we arrive at a day of reckoning. Spending less than we collect in revenue is a drag on the economy, but one that leaves our government in a better fiscal position, able to stimulate the economy as necessary. In the end, we arrive at the same point in either case. Not so with the trade deficit. That money is sucked from the economy, never to return. The only choice for sustaining an illusion of prosperity is deficit spending.
But, for me, the most disappointing failure in the wake of the The Great Recession is the failure of economists to do some serious soul-searching about how their growth and trade models and theories could have failed so miserably. When someone did ask the question, instead of pondering what they may have missed, economists simply retreated further into their own camps, the Austrians (the followers of economists von Mises and Hayek, not the people of the European country) blamed the Keynesians and vice versa. And all seized upon the superficial scapegoats of greed and corruption.
I suppose it was foolish of me to hope for anything more. Economists, after all, aren’t paid for independent thought. Their corporate and Federal Reserve benefactors pay them to toe the line in support of their growth policies, and nothing else. Still, I find it simply astonishing that no economist has seen the relationship between population density and balance of trade when the data practically screams it out. Or that not one has the courage to wonder where, even if resource issues can be held at bay indefinitely, population growth will ultimately take us when simple laws of physics dictate that it can’t go on forever. The lack of intellectual curiosity in the field of economics is stunning. One wonders how this subject continues to be offered as a field of study in our universities. Why not alchemy or voodoo? The field of economics is no more scientifcally-oriented than they.
And so The Great Recession, our best chance to date to awaken to the real forces that are driving humanity and our economy off a cliff, has been an opportunity lost. It seems that some worse event is required to rouse economists from their stupor – an event that their failure to seize this opportunity has made inevitable.