|
|
Musings Report 2021-12 3-20-21 If We Misdiagnose the Problem, Our Solutions Won't Work
You are receiving this email because you are one of the subscribers/major contributors to www.oftwominds.com.
For those who are new to the Musings reports: they're a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
Thank You, Patrons and Contributors!
Thank you stalwart contributors/patrons Chris H., Paul C., Mark H. and Miles H., and welcome new patrons / subscribers Manuel Q., Sean M., Jerry D., Jeffrey L, and Susan F. -- thank you very much!
If We Misdiagnose the Problem, Our Solutions Won't Work
We're all familiar with medical misdiagnoses, which lead to procedures and prescriptions that can't possibly fix the patient's condition because the source has been missed or misinterpreted.
Medical diagnoses are often tricky, as many general symptoms can arise from a variety of sources.
Social and economic ills can also be tricky to diagnose, and the diagnosis is hindered by political polarization and sacrosanct orthodoxies which make it impossible to have a rational discussion in public about many difficult issues.
If we can't even discuss a problem, then that creates another problem, because problems that can't be discussed openly cannot be solved.
There's also a human tendency to choose the diagnosis with the lowest cost, least painful solution. This allows us to quickly apply the approved solution and then declare the problem solved.
The current flood of financial stimulus strikes me an example of this misdiagnosis and application of an easy solution which fails to address the underlying disorder.
The conventional diagnosis of the post-pandemic economy is that the only problem is people don't have enough money, and so giving them money to spend will cure the financial damage the pandemic inflicted.
Creating $1.9 trillion out of thin air and distributing it is painless: who doesn't want free money? But is a scarcity of cash the source of America's economic malaise?
The general view is that pumping free money into the economy will automatically increase employment, launch new businesses, increase profits and tax revenues, etc.
Yet as I discussed in my blog post on the velocity of money,
Our Dead Money Economy, as the money supply expands in a parabolic fashion, the frequency that all this new money is changing hands (money velocity) is in a free-fall to historic lows.
Simply put, much of this money is either being saved ("hoarded" to economists who want us all to spend every dime of it), applied to debts (back rent, credit cards, etc.) or sent overseas for imported goods.
There is no guarantee that all this stimulus will generate the jobs, new enterprises, profits and tax revenues that are anticipated.
In my view, distributing stimulus money and expecting this solution to fix America's economic malaise is akin to applying a Band-Aid over a tumor. It may well hide the problem but it cannot resolve the disorder.
My current work focuses on the core function of any human civilization: the distribution of resources, capital and agency. Resources are straightforward--food, energy, shelter, etc.--and capital is financial (money), tangible (tools, ownership of land and enterprises, etc.) and intangible (social and human capital). Capital productively invested produces income.
Agency is control of one's life and having a say in community/public decisions. It's having some control and power over one's circumstances.
When these three are distributed asymmetrically, where the majority of the resources, capital and power are distributed to an elite, the society and economy are imbalanced and prone to stagnation and eventual discord.
The statistics are unequivocal: income-wealth inequality in the U.S. continues reaching new heights. This is reflected in asymmetric access to healthcare and other resources, asymmetric ownership of income-producing capital and limited agency.
The bottom 90% of American households receive a mere 3% of capital-generated income. That 3% might as well be 1% or 0.1%--it's inconsequential.
As for agency: Martin Gilens of Princeton University and Benjamin Page of Northwestern University are the authors of the study "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens."
Professor Gilens gave this brief summary of their conclusions:
"I'd say that contrary to what decades of political science research might lead you to believe, ordinary citizens have virtually no influence over what their government does in the United States. And economic elites and interest groups, especially those representing business, have a substantial degree of influence. Government policy-making over the last few decades reflects the preferences of those groups -- of economic elites and of organized interests."
(Source: Foreign Affairs, January 2021, Monopoly Versus Democracy)
That is as definitive as soaring income-wealth inequality. Both are inherently destabilizing.
Distributing "free money" (much of which goes to favored industries and cartels) is a Band-Aid over the metastasizing tumor of incredibly imbalanced distributions of resources, capital and agency/power.
If America cannot bear to discuss these realities (and structural solutions-- yes, there are solutions) openly, they will unravel the social, economic and political orders in a non-linear Cultural Revolution with a highly uncertain outcome.
Highlights of the Blog
Podcasts:
AxisOfEasy Salon #40: Subprime Attention NFTs (1:01 hrs)
Posts:
How We Stumbled to the Edge of the Cliff 3/19/21
Our Dead Money Economy 3/17/21
Stimulus Addiction Disorder: The Debt-Disposable Earnings Pyramid 3/15/21
The Art of Survival, Taoism and the Warring States 3/13/21
Best Thing That Happened To Me This Week
Getting letters/notes from long-time correspondents (Chris H., Paul C. and Edwin A., who wrote "I have been a reader since 2007.") It is a heart-felt honor to have so many longtime supporters and correspondents. As a lagniappe, check out this new pineapple--such a visual wonder, at least to my eye.
From Left Field
Reality Check on Renewables (18 min)
The Problem of the Shipwrecked Sailor: When Money Becomes Useless
Will the Race for Electric Vehicles Endanger the Earth’s Most Sensitive Ecosystem?
Neo-Feudalism: The Great Reset Is Not Great And Not New
For Creators, Everything Is for Sale: Digital stars are coming up with new ways to make money. Yet fans still hold the power.
"I'm In A Cult!" - The Miseducation Of America's Elites
Failed COVID Strategy Leaves Sweden Deeply Divided
How Facebook got addicted to spreading misinformation (via GFB)
Walter Youngquist: Geo-Destinies
Nazi 'Enigma' machine found at the bottom of the Baltic Sea
Long Covid Is Not Rare. It’s a Health Crisis.
How a college dropout in New Hampshire found a Shakespeare secret all the PhDs missed
"Civilization is hideously fragile and there's not much between us and the horrors beneath, just about a coat of varnish." (C. P. Snow)
Thanks for reading--
charles |
|
|
|
|
|
