China Rising

Click here to read a fascinating article on China's ascendency in the world.

When You Rely On Consumption

When you rely on consumption and people are not feeling too giddy about their futures...it's a recipe for a stagnant economy.

We're there, now! And the stock market finally realizes it.

The Way We Were

The fact over 70% of our economy is driven by consumption, you know, retail sales, is disturbing. Even more disturbing is that we seem to be fixated on an economic recovery that is dependent upon the same idea: people spending lots of money (or mostly debt) to buy several different colors of the same thing (I am guilty of the pleasure myself).

While this ramping up of consumption may have been sustainable for several decades, it clearly is not economically, environmentally, or socially sustainable for the future. We must figure out ways to enjoy our free time that don't require spending lots of money on jeans that will be thrown out in less than a month or a new Coach purse that looks just like the last one but is in a new color. As the divide between the haves and the have-nots deepens, it seems that unless we begin to save money, there will be more and more have-nots and fewer haves.

A vibrant middle class is the hallmark of a healthy democracy. People vested in their country's future. If the divide between rich and becoming poorer continues to swell, our own democratic fabric may begin to tear.

So while it is fun to speculate what swanky store will lease expensive space at the mall, it seems to me we need to have a national dialogue about the foundation of our economy. Is it Costco or Ford? Manufacturing or buying stuff? Going further into debt or having countries and people owe us money? Is this really a choice?

What We Have Become

In a very cleaver picture essay, this artist demonstrates with quick wit what we have become.  Attached to all things electronic!  

A few days ago I did a presentation to a 3rd grade class on forestry and what foresters do.  Of course, like anyone in this field, I got into forestry because I loved being outside, but I finished my photo presentation with a picture of my desk, because, like everyone else, that is where I spend most of my time.

We have become complicated by the cables.

All those lines of wire are symbolic, of course, of the fact that we really are no longer an economy or culture that actually produces something tangible.  We produce ideas, concepts, but nothing that we can stick into a container and ship overseas, load onto a truck, or even sell at the local market (as much as we talk local produce, really, most local is miles away from where you are shopping with your chic canvas bag).

Yesterday I heard, again, the number that just sends chills through me.  Over 80% of our economy is based on consumer spending.  Much if not all of what we spend money on is not produced here in the United States.

When I was talking to the 3rd graders I realized that very few of them knew paper came from forests.  They didn't mention logging when I asked them what happened in forests.  It's simply not "politically correct" to talk about manufacturing or producing anything other than locally grown lettuce.  Growing lettuce at a scale of selling it at the local Sunday market can not sustain a family.  We simply must figure out how to create middle class jobs with healthy wages.  This will and must include manufacturing things.  Using our resources.  Learning to live simply.

Unwinding this mess will be as tricky and frustrating as untangling all the cables underneath my desk.

Conspicuous Consumption Makes the News!

In today's New York Times came an article about the demise of conspicuous consumption because of the recession.  I am shocked!

What these kinds of articles do, however, is set up a dynamic (a conflict if you will) between the folks who believe this recession (I really really want to use the "d" key instead of the "r" key, and then a few "p's") is a cultural policy window and those who, like the current and past federal administrations, understand that unfortunately, our economy is dependent upon consuming.  Those who see this as a cultural policy window are savoring the moment of  "I told you so."  They saw the worst of the worst, the McMansions, the expensive cars, the gaudy jewels, the $1,000 Sex In The City Jimmy Choo shoes, and consistently (in their minds) said our culture was far too out on a consumption limb.  They are thoroughly enjoying the idea that we'll all give up our cars, our McDonald's Big Macs, and our Nordstrom credit cards for a simple life growing lettuce instead of grass in our front yards.

But then there are the folks who are coming late to this debate.  Laurie David and her stopglobalwarming.org who is currently on a rant about toilet paper.  This from a woman who lives in a huge mansion in LA and probably spends on clothing in a month what many of us spend in a year!  Or Arianna Huffington, who once wrote a piece about how many Blackberry phones she owned.

Culture wars or divisions will always be a part of our society.  And this combined rush for "sustainable" living (local food sources, green architecture, transportation etc) along with an energized policy initiatives on the environment, we may gradually move our culture toward a renewed sense of "just enough" rather than "too much."  But I think pundits expounding on how everyone else should live is not good.  If it's one thing we do well it's seeing through hypocrisy.  In order to sway a cultural shift, we  need to let the impacts of this depression (oops, recession) seep in as well as provide positive answers.  In other words, yes, we can all live well with two pairs of Jimmy Choos not four!  The reality is while this depression will alter all of our lives, it will not be a radical change in our culture.  Radical takes time.  A major concern is that while this depression will alter lives, it may also further expand the disparity between the rich and poor, further eliminating the middle class.  And that is not good at all.

But the good news is, we're beginning to have discussions in the "public town square" about how much stuff is enough.

Gas Tax

Recently, the New York Times editorial board encouraged Congress and the Obama Administration to increase the federal gas tax.  Their reasoning is, of course, that the more we pay at the pump the less we consume.  Which is traditional economic theory.

There is some good policy reasons behind this idea.  Oil, whether we are at peak oil or not, probably is a finite resource.  And clearly, as we witnessed during the summer of 2008, global consumption has vastly increased, causing prices here in the US to soar suddenly and with consequences to consumer's pocketbooks.  On the global security front, relying on international sources for oil obviously dictates our foreign policy in ways which probably cause diplomats to cringe.  We are held hostage to our consumption.

Decreasing that dependence as well as conserving a resource that no matter what, we will continue to use, is good public policy.

However, here we are teetering on a depression the breadth and depth is probably unknown to us.  The fact gas prices have declined is a good thing for most Americans, freeing up dollars to spend on food, clothing, education (and yes, a flat screen TV).  For those of us who heat with fuel oil, certainly the decline in oil prices is helping (I can actually feel comfortable turning on the heat!).

The reality is that our whole economy is wrapped up with oil.  Not just for cars driving in cities, but fertilizers for farming, resins for plastics, and jet fuel, to name a few.  While the proponents of an increased gas tax appear to only be leveling their tax at gasoline, whole economies will suffer having to pay more for gas.  For instance, not everyone lives in a city.  Rather, farmers and ranchers, from who we get our food, have to use lots of gasoline.  Increases in prices could severely hurt them.  Or what about the families that are trying to keep kids off the streets by participating in after school or Saturday programs, where a parent is required to shuttle their children across town?  

The one-size fits all policies attempting to solve environmental issues only backfires, causing resentment for taxing or regulation based solutions.

Rather, we need to look at our oil consumption issues much more holistically and broadly.  For instance, Wes Jackson and Wendell Berry have written about totally revising our farming policy.  

Their ideas are an example of how we need to seek solutions that have a much longer and larger view.  That are incentive based and help people live quality lives, not struggle trying to figure out how they can get by or around government policies.  Encouraging perennial crops in order to use less fertilizer and stabilize the soil (a natural resource if there ever was one) seems simple but will take lots of effort to overcome a century of farm policies intended to grow crops by pummeling the land.  But their suggestions are long sighted and can help reduce our dependence on oil.

Before we decide to attempt standard economic theory to change people's behavior, we really do need to understand all the consequences.  

In the meantime, walking is a good thing!

Since writing this, President-elect Barack Obama announced the appointment of Cass Sunstein as an advisor.  Sunstein, who taught at University of Chicago School of Law and is now at Harvard (also married to Obama's foreign policy advisor, Samantha Powers) is a proponent of behavioral economics, which, among other things, encourages, for lack of a better word, nudges, inducements, to get people to "behave" differently.  I suspect he would not support an increase in the gas tax.