Friday, February 6, 2009

What Ails Us

In these times of financial stress, I submit that we know what's wrong, but we won't face up to our issues. The most difficult things in life to change are both simple and hard. Losing fat weight is a great example. It is simple; eat fewer calories and exercise more; and it is hard, because I am like so many people that I can't seem get it done.

So what's wrong?
1. We don't save enough collectively. Economic growth is tied very closely to the rate of savings. We thought we could defy this particular law by using Chinese savings to finance our growth. Hasn't turned out too well. Meanwhile the government tax code favors debt over saving. But don't be fooled, mere incentives won't fix this, people's bad habits have to change.

2. Our education system isn't serving our needs. In a global economy, the only way to maintain hourly wage rates is to move up the skills ladder. It is folly to expect that low skill jobs will continue to pay high wages forever, when billions of Asians are waiting for the opportunity to do that sort of work. If our workers want to be paid more they must be able to do more. But our education system does not provide sufficient grounding in statistical methods for one example, to allow high school graduates to be effective at using six sigma methodology to improve process control. But we somehow expect the current system to come up with the breakthrough that will improve education. Meanwhile, new methods, such as charter schools are actively fought by entrenched forces. Even the big charities aren't giving money to educational experimentation. But there is another dirty secret, parental involvement in encouraging educational excellence is key. But, some pockets of our culture have come to disdain educational achievement.

3. We expect our government to know best how to direct investment, but this always fails when swimming against economic forces. We tried to push home ownership rates to above market and only managed to wreck that market. In a mostly free economy, government is never going to be powerful enough, wise enough, to direct an outcome that the free market would not provide. The tragedy is that every misdirected dollar is a dollar that doesn't go to a more productive use. What makes this hard to fix? We get addicted to the sweet stuff. Are you a homeowner? Wouldn't elimination of the mortgage interest tax deduction hurt; wouldn't you complain? But that very deduction misallocates resources to home ownership. A big deal? Maybe not, until you add up every corporate welfare subsidy (more ethanol anyone?) and realize how much of the economy is tied in non-productive subsidies.

But more fundamentally, we seem to have lost the sense of morality and civic duty that acted as a compass in year's past. We used to save much more, respect education much more, and believe in making our own way much more. What happened? I submit that the loss of respect for religion is part of the root cause, but I wonder what you think.


  1. B-Daddy, well said. As I have suspected, this "crisis" is more cultural than strictly financial or political but I've needed people as yourself and KT to articulate it.

    Link forthcoming.

  2. Paul said it well in 2 Timothy 3:1-5:

    "But realize this, that in the last days difficult times will come.For men will be lovers of self, lovers of money, boastful, arrogant, revilers, disobedient to parents, ungrateful, unholy, unloving, irreconcilable, malicious gossips, without self-control, brutal, haters of good, treacherous, reckless, conceited, lovers of pleasure rather than lovers of God, holding to a form of godliness, although they have denied its power;..."

    Whatever your beliefs are concerning a personal God, there are spiritual and moral laws that govern the universe as predictable as those formulated by Newton, that if broken bring consequences...simple cause and effect.

    I happen to believe in a personal God and expect that there will be judgment on our nation for our flouting His laws. Paul's letter to Timothy has a "modern" ring to it, because it describes so well our modern culture in detail.

    My prayer is that judgment is tempered with mercy and redemption, knowing that judgment is not always a bad thing. No one would wish another Depression and World War on us, but both of them produced the "Greatest Generation" of the last century, whom we honor now as they pass from the scene.

    Perhaps the hard times ahead will produce another last-days generation that will repudiate the softness and self-absorption that has brought such moral rot to our society. Perhaps the "sleeping giant" will once again shake off his slumber, and rise once more.

    That is my hope and my prayer.

  3. I wonder if there is an excessive amount of pessimism about the economy and the job loss. Without a doubt the economy is in a very tenuous position but isn't now the time to believe in our inherent ability to overcome, survive, and thrive?

    Instead of wasting too much time figuring out where blame lies (analysis of past mistakes is necessary to a degree) lets spend time developing solutions for ourselves and perhaps more help the people around us.

    Now is a time to tighten our belts and push forward believing in our inherent ability to succeed.

  4. "Don't trust anyone over 30."

    Hey, man, the hippies are now in Congress and the White House. Groovy, isn't it? We've dumped all those repressive notions of morality and hard work and thrift and now we reap the rewards.

    As for government directing investment dollars, since government employees do not have a direct stake in the outcome of the investments, it seems hard to believe that they would do it very well.

  5. Everyone, thanks for commenting. I think we all agree that "it's the culture, stupid."

    Dean, thanks for the link.

    Like anonymous, I am also an optimist, and perhaps I came off more negatively than intended. In order for us to really do something we have to understand what's wrong, hence, my post.

    I love the quote from 2 Timothy, but certainly one could argue that some of that has been true in every age, not just ours.

    KT, I agree that we reap what we sow.