Econo-Jitters

Dear J-

I think I’ve said it before, but it bears repeating:  if the economic growth of the past ten years was due to the free-wheeling spending that was going on, and the only way to get us out of the current funk is to spend some more, then why isn’t the money being put in people’s hands to be spent?  We’re now on the hook for nearly a trillion dollars applied to businesses and still we’re being chided for wanting to hold on to our money in case of, oh, an economic crisis.  Companies that have received bailouts yet persist in cutting employees deserve some particular ire here, I think — I understand the urge to cut costs, but when we’re being asked to spend, it’s hard to do without an income.

It’s another mixed message that our esteemed fourth estate tells us:  how to save money in the living sections, and how our penny-pinching is only going to hurt us in the business sections.  The deflationary spiral is vicious:  the less money that circulates, fewer businesses are able to sustain the storm, more people go out of work, thus the money that’s in our hands gets clutched tighter, and less money goes out into the economy … I understand the need to spend, yes, but we’ve built our businesses to worship the dollar as a measure of health, not employee happiness or country-wide economic strength.  We believe in the Darwinian model of industry:  agile, mutable companies will adapt to the changing markets and thrive, while the lumbering dinosaurs will fall natural victim to those pressures.  Well, I should say that we pay lip service to that model and then give blood transfusions to cadavers anyway.

We’ve placed blind faith in the government and its chosen agents — Treasury Department, businesses, and banks — to guide us out of the woods.  After all, they are experts in that particular world, but aren’t these the same experts who pointed boldly into that dark forest to begin with?  When we choose our regulators from industry experts and leaders, how is that different than putting gluttons as our aerobics trainers?  The too-cosy relationship between government and industry bodes ill for normal citizen.

Mike

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Bailing Water

Dear J-

So with the failure of the bailout plan to pass the House, both Democrats and Republicans stand united to do what politicians do best:  sling mud and point fingers.  And sure, you can point to any number of party lines on this one, but the most interesting statstic is that something like 85% of the representatives up for re-election in the fall election voted against it.  This speaks volumes to how deeply unpopular the plan is amongst the citizens; despite the tweaks and careful propaganda campaign, this plan had corporate welfare written between the lines.

I’ve read all kinds of newsprint spilled on such topics as how we’re supposed to feel — outraged, but willing to sacrifice for the sake of the national economy — and explaining the details of the plan (“See, it’s not like Congress is writing a check to Wall Street, because Congress is writing the check to the Treasury to give to Wall Street”).  So what was the straw on the camel’s back this time?  What happened that made taxpayers stage what amounts to a revolt?  Has the smug equation of the American Way with profit at any cost finally shaken out?

I used to read with some amusement the letters to car magazine editors; one evergreen topic was complaining about tests of cars that most folks couldn’t afford; the main reason given was one of aspiration and practicality (a car magazine that tests only Corollas would be … well, it would be Consumer Reports now, and even they’re starting to test prestige-mobiles).  It’s the same thing with CEO pay scales; the idea was that if they didn’t get the pay, they’d go someplace that would pay them what their inflated egos were worth; those bonuses, executive perks, and stock options were not only their just reward, it motivated the rest of us to work harder, flush with the idea of climbing that ladder.

But it broke down; with no mechanism in place to tie performance to pay, CEO scales went out of balance.  Didn’t do a good job?  Sorry, here’s the door — and a fat check.  Did a good job?  Here’s a fat check.  We’ve unleashed a race of incompetent, irresponsible (the buck stops somewhere else), inbred (let’s hire their CEO, he just got on the market!) executives who inhabit a closed ecosystem — no one gets in, they just keep playing musical chairs until everyone’s tired.  And yes, unfortunately, the failure of businesses doesn’t just affect only the executives.  But after having structured our businesses to venerate and insulate the wrong end of the pyramid (hint, not the pointy part), how else can we keep teaching the lesson?  How else do we shout our message?

Mike