As we drove the road home, my wife did something unusual for her – she asked me questions about economics.
She’s pretty much like most of us, in that she believes her life – and the life of the world – is ‘normal,’ and will continue to be that way going forward.
That includes me – even if I say the words about big changes coming, I behave as if nothing is really changing.
So I was surprised to hear myself say, and believe what I was saying, that the roots of our economic crisis run deep, at least to the early 70s, when President Nixon ended Bretton Woods, and that things haven’t been normal for a long time.
If ideas like that don’t make you a crank, (and if you’re not a professional economist and know what Bretton Woods is, you’re already half way there) they at least throw into merciless relief the contrast between the life you think you have lived, and the one you have really lived.
For instance, I believe the part of the economy that most affects most people – the ability to get and keep a job with generally increasing wages and moderate inflation – has been in decline for 40 years. That’s not a new thought by any means, nor are the companion ideas that we hid our backsliding by wives going to work and, later, by having extremely cheap money to borrow, but it’s reinforced by a growing understanding of just how much damn money has been in play elsewhere, and how few people have been playing.
At one point, $3-5 billion a day flowed to Wall Street.
Where it went was the ‘private money’ of mortgage securities. That’s the financial system which did not provide jobs or value for most of us and then collapsed, dragging the rest of it with us.
And that’s just one thread.
In the car, I talked with my wife about paper mills, the ones that used to sit along the Black River. When I was in high school, you could get a job in one of those mills, which are now mostly gone.
And when I used to ask the question ‘Where will these folks find good jobs?’ I was told that we would replace factory work (the ‘least valuable part’ of making something) with knowledge work (the most valuable part).
Which kinda, sorta happened, but the truth is – a lot of people never got another job as good as the factory job they lost.
Paul Krugman puts it better than I could, here. This fantasy that somehow a wide swath of ordinary people would prosper in the knowledge economy persists “not because it’s true, but because it’s comforting,” Krugman says, and he’s right.
And as the making of stuff was farmed out, the knowledge of how to make stuff went with it. We couldn’t manufacture a Kindle or an iPhone in this country if we tried. All we can do is sell them to each other.
And selling is fraught with its own problems, because what you’re buying is often not obvious, and thus a sucker’s bet.
So what do we have left to work with? How do we go forward? And with our diminished capacity, where can we still go?
Well, we remain good at media, good in some respects at research, though I suspect that research gets less useful as either applied technology or basic science the further it’s removed from making things. And agriculture, which is a big deal. We can feed a large piece of the world.