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The “Economic
Downturn” of current parlance is now fifteen months old. As 2009 crawls toward
an inglorious end, economists hopefully report that the worst is over.
Unemployment seems to be stabilizing at a bit over 10 percent, the big banks are
making money again, and home prices appear to be leveling out.
Perhaps so. All the same, the decade now drawing to a close has
proven – in terms of key economic measures – to be arguably the worst in
American history. Since the 1840’s, for example, only twice has the
inflation-adjusted value of the American stock market been negative over a
ten-year span: -0.2 per cent during the Great Depression era of the 1930’s; and
-0.6 percent during the 2000-09 period! Since 1950, each decade has recorded a
rise in the average net worth of Americans, ranging from 12 percent during the
sluggish 1970’s to 44 percent during the 1990’s. Alas, the 2000’s showed an
unprecedented decline in this number of -13 percent. The total number of
jobs in America, which has climbed every decade in American history (even during
the 1930’s), and which grew by 31 percent during the 1960’s and by 20 percent
during the 1990’s, was flat during the 2000’s: 131 million jobs in 2000;
the same in 2009.
These numbers suggest that something more fundamental is occurring
than merely another recession. Indeed, it appears that the economic order
created after World War II and sustained for over 50 years, has now broken
down. This new reality is partially disguised by macro-economic numbers that
seem sterile and distant. All of us, in fact, live in flesh and blood
communities – from families and neighborhoods to towns and states – that have
their own realities. Brought down to this level, what are the lessons taught by
the nation’s “Economic Downturn”?
Sustainable growth in the housing sector can only come from an
increase in the absolute number of stable families. During the original
American housing boom of the 1945-65 era, this form of expansion prevailed.
Young couples founding homes and anticipating children received about 99 percent
of direct Federal mortgage subsidies. However, starting in the late 1960’s,
Federal housing authorities shifted subsidies to “underserved” or “alternate”
family forms: divorced persons; single persons; unmarried couples; etc.
Indeed, by 1980 economist George Sternlieb and James Hughes convincingly showed
that American housing demand was being driven largely by family dissolution:
divorce was good for the housing market, since two homes would be needed where
one had sufficed before; the same would be true for intentionally created
single-parent families. [(George Sternlieb and James W. Hughes, America’s
Housing: Prospects and Problems (Rutgers University, 1980).] More
recently, housing demand was driven by raw speculation: in some areas, a third
to a half of new homes were bought by investors seeking a quick flip. Both of
these stimulants have now played themselves out, with fairly disastrous
results. Real growth will only resume when home builders and government
officials return to the fundamentals, delivering affordable homes to young
families.
Transnational corporations can no longer be relied on to provide
jobs. If these legal “artificial persons” were real persons, they would be
considered poor, nearly criminal citizens. Such contemporary massive
accumulations of capital have no loyalties, display no sympathies, and hold to
no conventional morality. Driven entirely by material goals, they seek market
share and competitive advantage at any cost. Jobs that they might provide for a
time are ephemeral, of no more substance than mist in the air. Communities that
give shelter and sound sustenance to transnational corporations can expect in
return the gratitude normally shown by a disgruntled teenager. Deer and Co. CEO
Robert Lane has put the matter nicely: “For years we talked about Deere as a
family. The fact is, we are not a family. What we are is a high-performance
team... If someone is not pulling their weight, you’re not on the
high-performance team anymore.” These are entities which –metaphorically
speaking – shoot their horses, toss Granny outside into the cold, and commonly
commit the economic equivalent of treason. Count on them for nothing.
At the national level, at least, a free market no longer exists.
While family businesses have been devastated by the tens of thousands during the
Downturn, the great banking houses (with the exception of hapless Lehmann
Brothers) have weathered the storm quite nicely. So did industrial dinosaurs
like General Motors, socialized in the blink of an eye to save the United Auto
Workers. These favored firms enjoy the status of being “too big to fail”; a
more accurate description may be “too big to succeed,” without government favors
and protection. Small firms still operate by market rules: including the
possibility of failure. Politically connected companies have escaped that
market discipline. They represent the now dominant neo-mercantilism of modern
State Capitalism, where true competition no longer applies.
The “American Dream” is over. By this term, I mean the
assumption that if an individual gained a decent education and is willing to
work 40 hours a week, he (or she) can almost automatically enjoy a middle-class
life, found a family, buy a home, and claim a decent retirement pension. This
formula no longer holds. A Bachelor’s degree now guarantees nothing: if paid
for by student loans, the one predictable consequence is thirty years of
financial servitude to the banks or the U.S. Department of Education. Put
another way, the 21st Century economy no longer delivers the
“cradle-to-grave” promise of lifelong employment, with one exception....
The great employment divide now lies between those who work in
the private sector and those who work for the state. Guaranteed hours,
early retirements on generous pensions, and lifetime job protection are now
found only among “civil servants.” Funded by the tax collectors impervious to
the claims of efficiency, and almost impossible to fire, public school teachers
and state bureaucrats have emerged as the 21st Century American
version of the Soviet Union’s nomenklatura, a privileged class resting on
the forced extraction of wealth from the unfavored masses. Unless politicians
are willing to face down the Education Associations and AFSCME, the burden of
maintaining this class will grow exponentially in the decades ahead.
This view of the prevailing economy may appear pessimistic and
discouraging. In fat, if one peers around these lessons, the economic
opportunities lying ahead are actually quite expansive. Young,
morally-grounded, responsible persons of reasonable ambition actually can claim
an exciting and rewarding future. The key is to learn from the errors and
immoralities of the failing economic model and embrace instead a true culture of
enterprise. The formula is family simple: real entrepreneurship bound into
resilient communities.
Real entrepreneurship is the economy envisioned by Adam Smith
and David Ricardo: a wide range of innovative and productive activities,
locally and regionally grounded and animated by a shared moral code. Not
coincidentally it is also the model envisioned by the founders of the American
Republic. In 1776, 87 percent of the free population of the American colonies
were independent proprietors. They owned real capital in land and
productive goods and they operated family-scale farms, shops, and modern
factories. These qualities imparted a sense of independence, autonomy, and
self-reliance that was critical to the formation of free government.
The opportunities to build a similar order abound in the early 21st
Century. The personal computer is a powerful tool for research, design, and
innovation, now available for use in every home. The Internet is a remarkably
democratic marketing agent, providing to the small shop opportunities for sales
not substantially different from those available to the great corporations.
Even modern machine tools are growing smaller and capable of being
decentralized.
The main obstacles to entrepreneurship today are the
financial and political favoritism shown to the large and established
corporations, and a toleration for monopoly. In many fields, barriers to entry
remain high. The great corporations manipulate the law to suppress
competition. Legal reforms should focus on opening the economy to the new, the
innovative, and the decentralized: to a new generation of economic pioneers.
Such innovators can help build, in turn, what Kevin A. Carson calls
a “networked civilizational entrepreneurship,” resilient communities that
rest on stable households and an array of mutually aware, family-based,
micro-enterprises. Family-held firms have always been the glory of capitalism,
the entities which combine innovation with a sense of responsibility for both
employees and host communities. Current incentives favor taking a company
“public.” Public policy should, instead, favor family ownership and the
continuation of closely-held firms. Elimination of inheritance taxes on
family-held businesses would be a good place to start.
For those young persons willing to be owners rather than wage
earners, innovators rather than security-seekers, and free rather than servile,
the future can be bright indeed.... |
