Friday, February 1, 2008

Changing times

Forget all the times the boy has lied about it: right now, there really is a big wolf prowling about out there.

For well over half a century this nation--and, in consequence, much of the world--has been getting by on a legal, social, economic, and cultural infrastructure that has been falling with ever-increasing speed out of touch with the realities of the world.

Robert Reich, Secretary of Labor under Bill Clinton and a major architect of the economic successes of that time, in a recent article in the Financial Times of London, looks at some of the economic problems. And problems there are:

[M]edian wages that are barely higher than they were in 1970, adjusted for inflation. Male wages today are in fact lower than they were then: the income of a young man in his 30s is now 12 per cent below that of a man his age three decades ago.
For three going on four decades now--nearly two generations--the middle class has been financially fighting a long retreat. In the process, it has successively brought into play three fallback financial defenses, each holding the front for a while before caving in to the advancing forces of lifestyle creep. The first defence to be deployed, and eventually fail, was the housewife.
The percentage of American working mothers with school-age children has almost doubled since 1970 – from 38 per cent to close to 70 per cent. Some parents are now even doing 24-hour shifts, one on child duty while the other works. These families are known as Dins: double income, no sex. But we reached the limit to how many mothers could maintain paying jobs.
The next baby to be thrown from the sleigh was time.
The typical American now works two weeks more each year than 30 years ago. Compared with any other advanced nation we are veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese. But there is also a limit to how long we can work.
When that wall fell, we as a nation turned to the last possible line of lifestyle defense.
We began to borrow, big time. With housing prices rising briskly through the 1990s and even faster between 2002 and 2006, we turned our homes into piggy banks through home equity loans. Americans got nearly $250 billion worth of home equity every quarter in second mortgages and refinancings. That is nearly 10 per cent of disposable income. With credit cards raining down like manna, we bought plasma tele­vision sets, new appliances, vacations. With dollars artificially high because foreigners continued to hold them even as the nation sank deeper into debt, we summoned inexpensive goods and services from the rest of the world. But this final coping mechanism can no longer keep us going, either. The era of easy money is over.
With the last line of defense breached, the enemy is within the walls, and the bloodbath is beginning.
[D]efaults on home equity loans have surged to the highest level this decade. Car and credit card debt is next. Personal bankruptcies rose 48 per cent in first half of 2007, probably even more in the second half, which means a wave of defaults on consumer loans. Meanwhile, as foreigners begin shifting out of dollars, we will no longer have access to cheap foreign goods and services.
So what's the answer?

Did you really think there was going to be some easy, sound-byte, short-paragraph answer? Pfui. Neither Mr. Reich nor I have any such simple/simplistic answers.

As others have pointed out in other contexts, we have now reached the point--accelerated, perhaps, by eight years of the most horrid national mismanagement conceivable--where we collectively need to re-think, from the bottom up, all the most "axiomatic" principles we have organized our society around. We can take nothing, nothing, for granted as we re-think and re-design. The public clamor for "change" may, for once, be a sound conception. The next administration is going to have to be as dramatic and unconventional as FDR was in creating a new nation for a new world era.

Else the American empire, and with it the Pax Americana, will very soon become a mere footnote in old-world history textbooks.

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