Posted by: Rob | January 9, 2010

American Economic Decline

One can not doubt that the United States of America has, in a very short time relative to the history of civilization, played a significant role in influencing the direction the human population of the earth has taken since the Declaration of Independence.  Many of the changes, advancements, and innovations have been good for humanity.  But some have not been so good, in my opinion.

As I have evolved as a thinking being, I have become very disillusioned, sickened even, at the apparent obsession many Americans (and Canadians and others in the western world) have for something called “making money”.  I listen to CNBC via XM radio sometimes during my commute to and from my job, despite the fact that the subject matter often nauseates me.  I wonder how the lives of those talking heads has become so distant from my reality.

It is my opinion that most people have forgotten what “money” really is, and that is a medium of exchange.  Although today money is no longer commodity money, but is fiat money instead, it should still be considered to have some tie to the production of durable and non-durable goods and the provision of services.  It really should be seen as way to simplify the old system of barter and make it easier for us to trade our labour or produced goods for the things we need or want.

But the concept has been corrupted, like most inventions of man, and money is now viewed simply for what it can buy.  And since the tendency of a lot of humans is to try to get something for nothing, efforts have focused on how to generate or “make” money without having to do any heavy lifting.

I found an interesting post related to this via maxkeiser.com which discusses the perversion of the manufacturing based economy in the United States and the twisting of the purpose of companies and corporations in order to, essentially, get something for nothing.

Quoting John Kozy, writing for GlobalResearch.ca:

Ideally, companies exist to provide products and services to people. If the products and services are good, the companies prosper; if they aren’t, the companies fail. That’s risky, so American companies inverted this model. They fed the public the notion, which has rarely been questioned, that a company’s responsibility is solely the financial welfare of its stockholders. Products and services are no longer the goal of business; they are merely means to profit. That reducing quality leads to greater profits quickly became evident. One fewer olive in each jar, one flimsy part in a complex device, one inefficient procedure in a manufacturing process, built-in obsolescence, built-in short product life-cycles, engineered high failure rates. The American quality standard became, “Junk”!

Kozy goes on to theorize that government complicity with corporations resulted in keeping wages low through non-enforcement of immigration laws, issuance of foreign worker visas, and restrictions on American workers to organize.  Low wages meant that Americans could not afford to buy higher quality foreign goods and had to settle for the substandard goods produced domestically.  Ultimately, American manufacturing was moved off-shore to keep costs down.  This, of course, resulted in many formerly good paying American jobs disappearing.  In some cases, forever.

Right away, Kozy says, you can see that this business model is not sustainable.  Declining wages and income ultimately leads to Americans inability to continue consuming.  The answer?  Easy credit terms at high interest rates.  That this disastrous introduction would lead to a large number of defaults in the future was anticipated and so the bankruptcy laws were amended to make it more difficult to discharge unpaid debts.  To cap this off, this consumer debt was included in GNP as productive spending, effectively skewing the data in a direction opposite to actual.

Much of what Kozy describes has resulted in the significant economic contraction that started in December 2007.  Presumably thanks to the virtual emptying of the US Treasury, a catastrophic economic collapse has been averted and, if you listen to the talking heads on CNBC, the economy is in recovery mode.  But is this really possible?  According to Kozy, it is not:

So when the American power elite speak of a rebounding economy, they are whistling Dixie in the Yukon. There is no economy left to rebound. It has been dismantled and exported. The ultimate cause of America’s collapse is the entrenched, rigid, faulty ideologies that our nation’s leaders have adopted. These ideologies placed America on the road to ruin. Foreign policies, especially wars paid for by borrowing, have increased the speed of travel on this road. And as incomes decrease, so do our freedoms. Future historians will someday ask, who lost America? The answer will be the American business community, its economists, and its politicians who have adopted rigid ideologies. That answer will serve as America’s epitaph.

A negative outlook, to be sure, but maybe a significant re-adjustment and re-alignment is sorely needed.  Time will tell.

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Responses

  1. the post-WWII generation seemed to be driven to work for a better standard of living for their children. we grew up with the expectation that the exponential ‘improvement’ would continue… feeling entitled to it.

    this may have been part of the cause of the “let’s make money” mentality. easy money. athletes do it. celebrities do it. why not me, too? Hey, i was smart enough to pick a stock that did really well in 2000, and look what happened to my 401K? i’m a gonna retire and be a rich man! park my yacht next to Michael Jordan’s!

    Mr. Kozy (and your extracted version of his position) may have captured the foundation for a fairly bleak future.

    and i thought MY last post was depressing?

    • How do you think such a good idea (improving your standard of living) could go so wrong? (the idea of continued growth, growth which is really unsustainable).

      It just got perverted when those who will find a way to get something for nothing (usually by taking advantage of others – something that’s occurred from time immemorial, it seems) managed to mainstream the idea that “making money” should be the ultimate goal.

      Secretly? I would love to see “money” become instantly worthless. Then sit back and watch what the “money hoarders” would do. I believe that they will be among the first to go in humanity’s next big die-off.


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