12 October 2012

Election-Year Issues: More on the Economy

In an earlier post I discussed how austerity measures bury economies and impoverish nations and how stimulation of the economy is needed in times of recession. This is the "big-picture" or macroeconomic view of the issue.

There is another side, however, that of the individual family. This is one kind of microeconomics. When I arrived in college in the late sixties, from Argentina where I grew up to Texas where I was born from a family with roots all the way back to the Mayflower, I observed a situation which was not apparent to most people. At the time Argentina was rich and stable, with a standard of living approaching the richest countries and a life expectancy exceeding that of the the US. There were storm clouds on the horizon, but I was too young and inexperienced to see them.

The US was nevertheless at the historical peak of its prosperity. But I could see that this prosperity was unsustainable. There were two major trends visible to anyone paying attention, both dealing with lifestyle expectations. In general, everyone expected to live as richly as everyone else. To me, coming from a different country, the expectation seemed unrealistic. If construction workers, plumbers, electricians, and others providing services to owners of houses lived at the same level of prosperity as those paying for the services, the charges would soon be out of reach for the buyers. No one providing a service can charge as much as per hour (much less more per hour) than what those paying for the service make. Soon the owners of the houses would be unable to hire anyone to work on the house.

The other trend was households with two incomes. When I arrived in college, many households lived very well with one income, especially those of doctors, college professors, and other professionals. However, other families thought that they should be able to live just as prosperously as the professionals. If both spouses worked, they could live as well as anyone else. Now, women have every right to work, just as men do, and to make the same salary for the same work. In fact, during World War II many women did just that and were understandably unhappy after the war to be expected to sit at home. The only problem was that, as two-income households became more and more common, inflation from demand caused prices to go up. Soon it became necessary for both spouses to work in order to cover all the expenses and have a little left over.

By the nineties it became clear that, though we had more gadgets than ever before and our salaries were higher than ever before, no one had reached the combination of prosperity and stability we enjoyed in the 1960's. We had lots of money, yes, but it bought very little by comparison. We had to resort to sending almost all manufacturing to other countries with low industrial wages in order to be able to buy what we wanted reasonably cheaply. Still it cost more to buy anything than it did in the 60's to buy the same product made in the USA. The ideology said that by sending manufacturing to other countries they would become as rich as we are. (Of course that never happened.) If they did manage to be as rich as we are, they would make as much as we do, and then we could not afford to buy their products or services. Everyone's standard of living would inevitably collapse. We are nearing that situation now.

The US economy continued to grow primarily on consumer spending. But since our money did not buy anywhere near what it used to, we resorted to credit cards. We indebted ourselves far beyond our ability to pay. Put another way, the limits of growth, as defined by ever increasing profits for investors, have been reached.

The economy is flat because families have realized that they can no longer live on credit. Millions of people have destroyed their credit cards and have no intention of getting in debt again. We will be undergoing a huge adjustment. Which party, if any, is saying anything about this? Are they aware of it? Are they listening? Where is anyone questioning the candidates about this? How do we redo our economy on another basis and not on consumerism? Because the time for that is over.

The hope is that the young people will come along with better values than we had. In part that is what I write about in my novels. You may want to take a look at Angela 1: Starting Over at www.strategicpublishinggroup.com/title/Angela1.html

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