OUR ECONOMIC FUTURE:

A Declaration of "I'm Scared"

by Marc O. Cherbonnier

Could civilization as we know it collapse? Yes, it could. But if we plan for such eventuality we'll be better off to cope with what comes. If we don't—well...
We are awash in non-specific economic reports foretelling a coming fiscal train-wreck for the "developed world," but we Americans continue to spend ourselves into massive debt, steadfast in our denial that trouble lies just ahead.
Economic contortions
Productivity of the so-called developed countries is only strong if 'their' corporations successfully utilize cheap foreign labor (outsourcing) to lower production costs to remain competitive. Outsourcing isn't a new phenomenon but has rapidly become super-sized by the recent huge participation of Chinese and Indian workers. This isn't a totally bad thing, no one begrudges their unemployed and poor getting jobs and a better life. The bad thing for China & India happened when they were excluded from world markets to begin with, decades ago (seek an explanation of that in your history books).

The bad thing for developed countries has yet to be discussed and is just now materializing. Keeping productivity high through outsourcing raises profits for corporations, but maximizing profit also requires cutting domestic jobs. After three years of horrible unemployment where millions of 'good' jobs have 'disappeared,' stunned recent college grads resist hamburger-flipper jobs and are still living at home.

Maybe it's getting better? There has been a recent uptick in employment during April and May. Coincidentally(?), this is just when Bush was sliding in the polls. Now, any new jobs are good news, but look a little deeper—these jobs are almost all the low-quality, and low-pay kind, the type nicknamed "McJobs." One suspects Bush 'beat the drums' for his CEO buddies to hire employees to help him win reelection. Question: What do you think will happen to these McJobs after the election?

Wealthy CEOs and large stockholders may be hiring a few more servants, but does that float your boat? Trickle-down never worked and never will. Who expects it to? The number of middle-class jobs is shrinking throughout the developed world as jobs flow to the so-called Third-World, most significantly to China and India. Again, that's good for them. But, for our sake, is this trend going to slow down any time soon? Or will it only end when the non-rich everywhere earn lower, world-competitive wages with few or no benefits?

Forces beyond our control are giving us Vertigo
Since the outsourcing of jobs (and loss of personal wealth, for most of us) is still in an early stage, most of the massive social and economic upheaval is still yet to come.

Bush has been the steward as our nation went from running fat budget surpluses to running largest-ever deficits from tax-cuts for the very rich and two unwarranted wars, increasing our total national debt to a record $7.23 trillion—not including unfunded future liabilities for Medicare and Social Security (which few in government seem to care about—with the notable exception of Maryland Congressman Ben Cardin).

Unfortunately, trickle-down does work when the federal budget is in the red: Due partly to federal budget cuts, states and cities across the land have record deficits. Therefore, to avoid raising state taxes, states have cut critically needed social services for the most needy to the bone. Want more vertigo? Personal credit card debt and mortgage foreclosures are at all-time highs while we're in the midst of a housing boom for the most expensive houses. (Are you starting to get the picture yet?)

Thankfully, interest paid on our zooming national debt (and non-credit card loans, generally) is being kept artificially low because the Chinese and Japanese are buying most of our bonds to encourage us to buy more of their exports (so I heard), but they could stop buying our bonds at any time and dump them. Then, suddenly, lower demand would cause the bond market to require higher bond interest yields.

Such a swift change is becoming more likely since interest adjustment is long overdue. The result would hugely increase our debt service (interest) charges all at once by hundreds of billions a year. Talk about inflation! Even the "Defense" budget would be small compared to our debt interest if and when this happens.

Meanwhile, as we continue over-spending and increasing debt, the dollar is falling compared to most currencies. It has fallen over 40% relative to the euro just since Bush became president. The good news is that cheap dollars will make it easier to pay off debt, but what will deflated dollars do to your bank savings and money market accounts, currently earning 1% interest?

What should we do? Brilliant men and women have watched this situation develop, but mum's the word on what we should be doing. Are they all so totally confused they won't risk an utterance? Perchance will their careers be ruined if they are wrong? And then there are the political people that some call our leaders: what do they say? Nothing. Or, worse, they make glowing predictions about "our increasing productivity."

Could civilization as we know it collapse?
We (and Western Europe too) are like the Romans of yore, looking at each other and trying to fathom why so much has gone terribly wrong all at once, but there seems no answer. To me, there seems a raised consciousness that our currencies and economies are inflated and that the Third World's currencies and economies are commensurately deflated. It is as if the valuation for economies is changing as the long-forgotten hundreds of millions of under-utilized workers beyond our borders suddenly have worth, and therefore our worth is made commensurately less. That economic realization will be our reckoning.

And now an alarming quote (which includes some hope, too) from Simone Weil, a French philosopher who seemingly foresaw this future:

"After the collapse of our civilization there must be one of two things: either the whole of it will perish like the ancient civilizations, or it will adapt itself to a decentralized world.

It rests with us, not to break up the decentralization (for it automatically goes on increasing like a snowball until the catastrophe comes), but to prepare for the future."

If, as postulated, a collapse of our civilization could very well happen, please consider Weil's words well, for we do not wish to be in such jeopardy ever again. How do we avoid it, you ask? The same way you avoid future wars: Get rid of antiquated notion of "countries" which, if large and powerful like the US, can be used like weapons in a bad leader's hands.


Reference: A proposal for "Virtual Nations" (published in the Chronicle last November) would complement Weil's advocacy for a decentralized world.



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This story was published on June 18, 2004.