Maybe it's my new anti-depressants talking but I've been trying to work out a vision where this world wide recession could actually be healthy for the planet in the long run. Our current system depends on unlimited growth, in energy use, consumption of materials, and expanding population yielding CO2 problems, pollution problems and violent confrontations over dwindling resources. A simple understanding of the laws of thermodynamics will tell you perpetual growth is impossible to sustain. The attempt to do so results in the inevitable boom and bust cycle most civilizations find themselves experiencing. At some point the people of this planet are going to have to limit their expectations to a sustainable status quo, to making incremental gains in quality of life through innovations and efficiencies rather than the wholesale disregard of consequences. Unfortunately, we may have painted ourselves into an apocalyptic corner. Just look at the Christmas retail season for example. We in this country have built our whole retail consumables economy so that it is dependent on moving craploads of expendable junk in celebration of the birth of the messiah. How insane is that? The entire livelyhood of lterally millions of Americans depends on the market for Christmas presents, they spend 11 months of the year breaking even waiting until people are motivated to spend. This year they won't spend as much and next year they may spend less. Look at our auto industry. In the 60's and 70's the entire industry was built on endless cheap energy that married us to the middle East and Planned Obsolescence that killed off any drive for quality and innovation. Was this folly not foreseeable to anyone? Wasn't the stupidity of building separate Hummer dealerships in every city obvious? 10 years ago? Why doesn't the US auto industry have a 50 mpg car? The kicker in all this is of course the inherent desires of human beings; everyone one wants more. I think it's part of our evolutionary wiring and takes great mental strength to restrain. That 'desire' is the basis of capitalism, greed and the greed to exploit greed. But at least it is predictable; without vigilant regulation, capitalist will exploit the people. Count on it, every time. So I'm not looking for a great egalitarian society to emerge but I would like it if a common awareness starts to take hold, people waking up to what is rational and what is irrational. It's certainly rational for people to cut back on their spending and rein in their expectations and that by itself will have a profound effect on our economic model and American Society. Tough love that could leave the junkie of American consumerism suffering some severe withdrawal symptoms.
recessions are a necessary evil in the scope of economics. I can't believe people (on tv and radio) are still debating on if we are in a recession or not. They give stats like '95% of [whoever] think we are in a recession.' Yeah, no ****. Tell us something we havent known for the past year.
I think it's more likely for us to dump money on another war than to tighten the belt. The historical precedent is spectacular failure or conquest of another country.
A growth free world, or sustainable growth? What would either look like? New Scientist magazine took up the issue, with a variety of articles in one of their recent issues. Here's a piece of one article. See full article here "Special report: Why politicians dare not limit economic growth 15 October 2008 by Tim Jackson SCRATCH the surface of free-market capitalism and you discover something close to visceral fear. Recent events provide a good example: the US treasury's extraordinary $800 billion rescue package was an enormous comfort blanket designed to restore confidence in the ailing financial markets. By forcing the taxpayer to pick up the "toxic debts" that plunged the system into crisis, it aims to protect our ability to go on behaving similarly in the future. This is a short-term and deeply regressive solution, but economic growth must be protected at all costs. As economics commissioner on the UK's Sustainable Development Commission, I found this response depressingly familiar. At the launch last year of our "Redefining Prosperity" project (which attempts to instil some environmental and social caution into the relentless pursuit of economic growth), a UK treasury official stood up and accused my colleagues and I of wanting to "go back and live in caves". After a recent meeting convened to explore how the UK treasury's financial policies might be made more sustainable, a high-ranking official was heard to mutter: "Well, that is all very interesting, perhaps now we can get back to the real job of growing the economy." A UK treasury official accused me of wanting to go back to cave living The message from all this is clear: any alternative to growth remains unthinkable, even 40 years after the American ecologists Paul Ehrlich and John Holdren made some blindingly obvious points about the arithmetic of relentless consumption. The Ehrlich equation, I = PAT, says simply that the impact (I) of human activity on the planet is the product of three factors: the size of the population (P), its level of affluence (A) expressed as income per person, and a technology factor (T), which is a measure of the impact on the planet associated with each dollar we spend. Take climate change, for example. The global population is just under 7 billion and the average level of affluence is around $8000 per person. The T factor is just over 0.5 tonnes of carbon dioxide per thousand dollars of GDP - in other words, every $1000 worth of goods and services produced using today's technology releases 0.5 tonnes of CO2 into the atmosphere. So today's global CO2 emissions work out at 7 billion × 8 × 0.5 = 28 billion tonnes per year. The Intergovernmental Panel on Climate Change (IPCC) has stated that to stabilise greenhouse gas levels in the atmosphere at a reasonably safe 450 parts per million, we need to reduce annual global CO2 emissions to less than 5 billion tonnes by 2050. With a global population of 9 billion thought inevitable by the middle of this century, that works out at an average carbon footprint of less than 0.6 tonnes per person - considerably lower than in India today. The conventional view is that we will achieve this by increasing energy efficiency and developing green technology without economic growth taking a serious hit. Can this really work?" And here's a more recent interesting bit from NS.
I'm not sure what a steady state economy would look like (sounds like something centrally planned), but the current state of rapid globalization will become more and more "turbulent" according to Nassim Nicholas Taleb and Benoit Mandelbrot. http://www.pbs.org/newshour/bb/business/july-dec08/psolman_10-21.html
I said this as soon as the first proposed bailout was being talked about. Our country needs to feel the pain for a while. Private citizens as well as businesses need this to get their priorities back in check. http://bbs.clutchfans.com/showpost.php?p=3914980&postcount=15
Let things fail. If they're "too big to fail", they're too big, period. I'd rather have some corrective short-term pain than a couple more years of false euphoria leading to an even more massive collapse.
Please. Compared to other places in the world where there are real problems and real struggles, this is nothing. People won't get to drive two cars?! Or have gigantic houses that they can't afford?! Or get more flat screen TV's?! Or iPods or any of the millions of ridiculous things that we take for granted here? People do not understand the concept of enough. Myself included. I know how difficult it is to not get wrapped up in the rat race. I good swift knock back to reality wouldn't be bad for everyone.
If you read the Mandelbrot guy, and his sleepless sidekick, you get the notion that "back to reality" is undefined though. Back to one car? Fine. Back to torches and clubs? Maybe not so good.
I've been rolling this over in my head for a while. It would be satisfying to let them fail, for sure. Justice, at last. But what, in your opinion, would happen during this hypothetical "corrective short-term pain?" I mean, if AIG failed, many major banks fail, and dozens or hundreds of smaller banks fail.... aren't we looking at worldwide financial collapse? How, exactly, do we recover from that? Would it really be short term? I'd like anybody's opinion on this. My impression is that allowing the world financial system fall like dominoes into ruin would cause a long term worldwide depression. But I'd like to hear other assessments.
Hardly. I didn't know you just meant GM. I thought you meant the entire system, and all of us, needed a good kick back to reality. It's like Nolen is saying: we don't know exactly how far the drop would be. But GM? I could blather about my car maker bailout opinion if you want. If the government gives them a cent, I would want all kinds of strings attached, including a huge change in their management. As in "here's your loan, and here's your pinkslip, chump."
I also do not think that we should have had the original bailout. I don't think that would have sent us back to the stone age either. It would be not fun for a lot of people for a while but I think it would be a much better "righting of the ship" than to prolong the pain over a very long recession.
The problem with the whole "let it fail" theory is that it's *more* expensive to do so. GM failing is estimated that it will cost $200 billion - due to reduced tax revenues, increased social program costs, etc. The bailout is estimated at $25 billion. So you're cutting off your nose to spite your face. That's what people aren't getting about these bailouts - they are not being done to save the industries. They are being done to save everyone else from the fallout, and because they are financially the smartest thing to do. Yes, we could have skipped the $700 billion bailout - but if that option costs taxpayers $1.5 trillion (in expanded government costs and reduced tax revenues) AND costs jobs, is that really a good thing to do? The idea of these bailouts, if done properly, is to create a softer landing that has a lower net cost to everyone. If the purpose of government is to provide for the well-being of its citizens, why is that a bad thing?
You'll be shocked to hear I don't think that bailout was the smartest thing to do with that money. I agree with that, with the huge caveat you put in there... if done properly. If we're going to do more stupid stuff like the $700,000,000,000.00 thing, then I'd just as soon hit rock bottom now so that we can maybe be out of it by the time my kids reach adulthood instead of compounding the problems by creating really bad debt that does nothing to help us long-term. I'm usually a deliberate, but not ideological, debt reduction guy... but this is an opportunity to make some major changes in our economy and culture. If more debt sets us up for long-term improvements, I'm all for it. If we piss it away like we have over the last 8 years and particularly over the last few months, I'm very much against it.
Still, if we spend money on a bailout to avoid the expense of a fall, we also need to pay for the remedies to the problems that caused the crisis in the first place that the market ordinarily would provide -- restructuring companies so they can stop sucking, improving risk management behaviors, training people so they can produce value commensurate to their pay, etc. SOMEONE, GIVE THIS MAN A COOKIE!
