Did Someone Say Economic Recovery?
The notion of economic "recovery" poses a problem of understanding and carries an expectation that economic recovery will follow similar historical patterns of the past. I don’t think this is going to happen. I don' pretend to understand the deep science of economics but statistical minutiae does not really help us here. We might now be marking a sea change event in Western economics that constitutes the real "paradigm shift" all those Wall St. sales people hyped 10 years ago.
The real economic paradigm shift for the developed world finally took place in 2008. The shift is not a lateral shift, a tech or an information shift; it is a downward shift in real wages. This trend has been occurring for a number of decades but finally reached a tectonic subduction moment when the world housing market collapsed. It is an economic correction that was bound to happen sooner or later when trillions of dollars of perceived value suddenly evaporates. This is what happened when the West, starting with the US, could no longer float the humongous and over inflated funny money housing bubble
I don’t believe we will ever recover in the traditional manner- at least for the next few generations and until the world gets used to a mean global distribution of Gross Global Economic Product. We will never recover the lifestyle, the buying power, the security of wealth that our generation (the heart of the baby boomers) had the fortuitous luxury to live through since the 1950’s. When we were kids, world population was 3 billion. It took nearly 2,000 years for world population to go from 200 million to 3 billion in 1960. It took a mere 50 years to go from 3 billion to the 7 billion we have now. This is an astonishing and telling statistic about the economic problems we face ahead, not only domestically but globally.
It's going to be much harder for the coming generations, the dwindling middle classes and the poor in Western societies to continue to consume @ the Wal* Marts of the US and the world. Energy prices will continue to rise and as they do millions of consumers will continue to be anal retentive as a natural reaction-realizing that food , medicine and mortgage payments are more important than I pads, three wheelers and Disney World trips. As energy costs rise, everything else rises too.
As far as material wealth, we boomers have been the beneficiaries of the single most prosperous generation world history has ever known. Real wages on a per capita of GDP basis however, have gone down since boomers came into their prime. In the U.S. fewer and fewer people have gained more and more wealth over the last 40 years as well. This oligarchic shift of wealth and power also impedes real economic recovery for 85% of American households. This “popular recovery” just ain’t gonna happen until this crucial economic demographic begins to trend back towards the middle classes.
Even in the best of all possible worlds these halcyon days of material exorbitance for the west are over. It simply cannot be sustained at the levels we have maintained w/ a developing world burgeoning population coming into the world economy in the form of massive labor and manufacturing out sourcing. The whole world is beginning its slow bend toward the mean. China represents the tipping country toward this trend. This means we bend down as the developing world trends up.
This IS the paradigm shift that is occurring now. This is why our entitlements, social security, etc., will slowly begin to go bankrupt. The "recovery" as I see it, will be one of psychology and practical awareness, and not an increasing per capita real wage recovery. We will have to realize that to recover means we will have to learn to make do w/less on a per capita basis and that we will have to learn to be far more efficient with what we have.
The notion of economic "recovery" poses a problem of understanding and carries an expectation that economic recovery will follow similar historical patterns of the past. I don’t think this is going to happen. I don' pretend to understand the deep science of economics but statistical minutiae does not really help us here. We might now be marking a sea change event in Western economics that constitutes the real "paradigm shift" all those Wall St. sales people hyped 10 years ago.
The real economic paradigm shift for the developed world finally took place in 2008. The shift is not a lateral shift, a tech or an information shift; it is a downward shift in real wages. This trend has been occurring for a number of decades but finally reached a tectonic subduction moment when the world housing market collapsed. It is an economic correction that was bound to happen sooner or later when trillions of dollars of perceived value suddenly evaporates. This is what happened when the West, starting with the US, could no longer float the humongous and over inflated funny money housing bubble
I don’t believe we will ever recover in the traditional manner- at least for the next few generations and until the world gets used to a mean global distribution of Gross Global Economic Product. We will never recover the lifestyle, the buying power, the security of wealth that our generation (the heart of the baby boomers) had the fortuitous luxury to live through since the 1950’s. When we were kids, world population was 3 billion. It took nearly 2,000 years for world population to go from 200 million to 3 billion in 1960. It took a mere 50 years to go from 3 billion to the 7 billion we have now. This is an astonishing and telling statistic about the economic problems we face ahead, not only domestically but globally.
It's going to be much harder for the coming generations, the dwindling middle classes and the poor in Western societies to continue to consume @ the Wal* Marts of the US and the world. Energy prices will continue to rise and as they do millions of consumers will continue to be anal retentive as a natural reaction-realizing that food , medicine and mortgage payments are more important than I pads, three wheelers and Disney World trips. As energy costs rise, everything else rises too.
As far as material wealth, we boomers have been the beneficiaries of the single most prosperous generation world history has ever known. Real wages on a per capita of GDP basis however, have gone down since boomers came into their prime. In the U.S. fewer and fewer people have gained more and more wealth over the last 40 years as well. This oligarchic shift of wealth and power also impedes real economic recovery for 85% of American households. This “popular recovery” just ain’t gonna happen until this crucial economic demographic begins to trend back towards the middle classes.
Even in the best of all possible worlds these halcyon days of material exorbitance for the west are over. It simply cannot be sustained at the levels we have maintained w/ a developing world burgeoning population coming into the world economy in the form of massive labor and manufacturing out sourcing. The whole world is beginning its slow bend toward the mean. China represents the tipping country toward this trend. This means we bend down as the developing world trends up.
This IS the paradigm shift that is occurring now. This is why our entitlements, social security, etc., will slowly begin to go bankrupt. The "recovery" as I see it, will be one of psychology and practical awareness, and not an increasing per capita real wage recovery. We will have to realize that to recover means we will have to learn to make do w/less on a per capita basis and that we will have to learn to be far more efficient with what we have.
posted by dave warren at 10:45 AM
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