Posts tagged history
its all about the balance sheet, baby
Jan 12th
So.
This is about the American economy and a plea for all of us to quit bitching about how the government is the fault for all our economic woes.
Yeah, sure, the government could (and should) take some actions to help … and improve their own balance sheet.
But. The combination of the US population (people) and corporations have more money on their balance sheets at their disposal than the government (therefore can make a bigger impact).
And.
Remember.
Its all about the balance sheet baby.
What do I mean? Savings & cash.
And I mean we are finally heading in the right direction (so quit looking at unemployment and government balance sheet for a moment).
Overall households have increased their % of hhld savings as a percentage of disposable income.
I won’t get the numbers right but suffice it to say people are improving their household balance sheets.
And.
Corporations are flush with cash. As they have become more conservative and banking money for the future their balance sheets have become quite healthy with cash.
These are indicators of good things in the future.
Oh. And before I get to the crux of the consumer/corporate balance sheet dilemma let me share one quick factoid about US debt, their own balance sheet and how we make money (as a country).
I share this factoid slide from a presentation because, I admit, I do get a little tired of how Michelle Bachman and lots of other people so casually focus on debt:
————————————–
(this comes from an Economic Summit presentation in London)
US is a Giant Investment Bank
- The Asian Savings Glut enabled the US household to “Borrow” money cheaply from savers looking for Capital Preservation and Security and then “lend it back” as risk capital
- If you borrow $100 at 4% over 7 years and set aside $28 to pay the interest, you can then buy “equity” in emerging markets with the remaining $72
- If this “only” produces 10% pa, then over the life of the bond you have doubled your equity capital, you now have $144 after interest, and $44 after principal
- Traditional balance sheet measures such as debt to GDP ignore the asset side of the equation, while liquidity measures such as debt service to income ignore the different nature of equity (capital growth)
- Traditional economic measures fail to capture the real balance sheet and cash flow situation and declare this to be an “Imbalance”
- A slide from Economic Symposium London march 2011
——————————————–
I shared that just so I could get beyond the country’s balance sheet discussion and get to what you & I can do and should do.
So.
On to us consumers … and what we can do to insure some economic growth in the future.
Its about the savings.
Uh oh.
I didn’t say spending (which spurs the economic outlook).
Yeah. Its true that the economy demands increased consumer spending. The problem is that millions of lower- and middle-income households have lost their capacity to spend – in actual dollars as well as mentally ‘scared’ to spend even if they have the dollars.
Despite the growth in savings as a percentage there is an overall lack of savings ‘safety net’ and a level of debt (even if it is small) that hovers like a gargoyle looking over most people’s shoulder. Although it would be helpful if affluent households spent more, we shouldn’t be calling upon a struggling majority to do so. In the long run, the health of the economy depends on the financial stability of our households.
Therefore we need to reduce our own debt on the balance sheets. Oh. In addition we (the people) need to become less dependent upon social security as “the” retirement fund (I will get back to that point).
Attitudinally it appears like we are making the needed shifts.
In the second quarter of 2009 households put away 7 percent of disposable income, compared with under 2 percent in the third quarter of 2007. Yet the savings rate is falling again, down to 5.3 percent in December.
(note: I added that last point because that is our biggest issue … changing long term behavior and our desire to want to spend versus save)
According to a Harris Poll (maybe in 2010?) 27 percent of Americans have no personal savings and 34 percent have no retirement savings, an increase from over a year ago.
Here is the tricky part.
US consumers want to reduce their debt, but the economy’s recovery depends on their spending. By some estimates, deleveraging is happening more because of defaults than because of people opting to pay down their debts. A decline in credit-card debt, for example, closely tracks the rate at which banks are charging off delinquent card loans.
In addition job losses are leading to foreclosure or bankruptcy. In others, borrowing has stalled because card issuers have reduced credit limits or raised interest rates.
Think about this …
These are all “forced” balance sheet improvement behavior patterns.
These are not “choice” behavior changes.
That is a point I am making so that we don’t get fooled by numbers …. but rather focus on behavior.
Any behavioral model will show you that forced behavior creates only short term behavior change. And that is why many Media & Economic reporting information is flawed and misleading to the general public.
Yes. Once again I will point out there are some encouraging signs which we should nurture.
The cost of debt payments as a share of personal disposable income, has fallen to around 12 percent, from nearly 14 percent when the recession began. But that overall figure masks wide disparities – millions of households have no debt at all, while others are deep in debt (go back to my “the Two Americas PewResearch post).
Yes.
By looking only at numbers it appears the trend is moving in a positive direction.
But (and this is a big but) …. we need a change in attitude (which will create the behavior necessary to make it all work).
American people are addicted to spending (this is probably an entire post all in itself on breaking down the addiction culturally).
But let’s instead think about some things.
Americans definitely spend more than people in western Europe and Asia. Definitely. Its part of our DNA.
You can look at consumption levels and control for purchasing power over the last several decades, and America is simply in a league of its own. The only people who come close are people in Britain, but they are about 85 percent of the level of American consumption. Germans, French and others are in the 70 percent range, Japanese even a little lower. So Americans spend like no one else.”
So what can help us become better savers.
I guess I think about this like any addiction.
It has to be part personal responsibility and part ‘system’ (a system that enables us for success).
I think we need to improve the access of lower-income households to savings institutions.
We just saw Bank of America and other banks trying to charge an extra fee on people with debit cards, particularly with low minimum balances. That tends to discourage people especially among lower-income households.
We need to remember about 25 percent of lower income America is unbanked (they don’t have bank accounts).
So.
First.
Similar to Europe we need to incentivize banks to create small savers accounts. They have a low or minimum balance, that have no fees, and pay a recognizable interest rate. These can be subsidized by government working with banks (and that, my friends, is a good use of government spending).
Second.
we need to revise our tax laws. There are too many tax exempt advantages incentivizing borrowing. We need to incent saving.
Third.
Learn from others.
We can learn from societies that promote a more balanced approach to saving and spending.
Few Americans appreciate that the prosperous economies of western and northern Europe are among the world’s greatest savers. Over the past three decades, Germany, France, Austria and Belgium have maintained household saving rates between 10 and 13 percent, and rates in Sweden recently soared to 13 percent. By contrast, saving rates in the United States dropped to nearly zero by 2005; they rose above 5 percent after the 2008 crisis but have recently fallen below 4 percent.
Unlike the United States, the thrifty societies of Europe have long histories of encouraging the broad populace to save.
During the 19th century, European reformers and governments became preoccupied with creating more frugal citizens. They focused on creating hundreds of savings banks that enabled the majority (pretty much anyone) to save by accepting small deposits. Central governments established accessible postal savings banks where small savers could bank at any post office. In addition, to encourage thrifty habits in the young, governments also instituted school savings banks.
All these actions fostered a culture of saving that endures today in many countries (and fosters a certain type of economy). For example … the French government attracts millions of lower-income and young savers with its Livret A account available at savings banks, postal savings banks and all other banks. This small savers’ account is tax free, requires only a tiny minimum balance, and commonly pays above-market interest rates. And in German cities, one cannot turn the corner without coming upon one of the popular savings banks, called Sparkassen.
Legally charged with encouraging an overall savings mentality these banks offer no-fee accounts for the young and sponsor financial education in the schools.
Ok. And while we may not have all those governmental driven opportunities here (and want to use that as an excuse) we need to get in our heads that even with the economy we can save. Even with reduced income we can save.
We only have to look to Africa, where millions who have just risen above the poverty level, have created savings accounts despite the fact their disposable income does not permit any luxury.
In addition, many foreign countries have also restrained the expansion of consumer and housing credit with the intent to minimize being personally over-in-debt. Home equity loans are rare in Germany, and Belgians, Italians and Germans are rarely offered an American-style credit card that allows the user to carry an unpaid balance.
Oh.
Lastly.
Savings & retirement.
Your retirement isn’t about social security.
When Social Security came about in the 1930s, it was largely a program to keep families from starving and from going absolutely broke. It was never intended as a long-term benefits program. Yet life expectancy has increased over time and now today, many Americans depend on Social Security as their primary source of retirement. We need to change our ‘entitlement’ attitude on this.
That’s it for today.
At the end of the day, someone, somewhere in America has to save. In fact a lot of someones somewhere have to save.
Save a lot, save a little …. just save.
And, remember, it’s all in your head. Because if an African earning 5,000 dollars a year can figure out how to save money I imagine we can figure out how to set aside some money.
poverty redefined?
Jan 8th
So.
The US Census Bureau has redefined poverty in the USA. Its kind of like having someone give you a new report card for a past semester.
Whoa.
(I am certain this was a West Wing episode … it was)
It’s from a Season 3 episode called “Indians in the Lobby” where two White House staffers discuss a political problem:
SAM: On Monday, the OMB is putting out a new formula for calculating the
poverty level.
TOBY: What’s the problem?
SAM: It’s a good news, bad news thing. Under the new formula, poverty is up two percent. It was anyone under $17,524, now it’s $20,000.
TOBY: What does that shake out to?
SAM: Four million new poor people.
TOBY: Four million?!?
SAM: Yeah. Obviously, that’s the bad news.
TOBY: Yeah…
SAM: The good news is more people will be eligible for benefits.
TOBY: And taxpayers are nuts about that. Let’s get back to the bad news. Four million people became poor on the President’s watch?
SAM: They didn’t become poor. They were poor already. And now we’re calling them poor.
TOBY: What was wrong with the old formula?
SAM: I don’t know.
TOBY: Find out.
SAM: It is possible that this is a statistical reality and not a political finding.
TOBY: Well, get together with somebody at OMB and find out what was wrong with the statistical reality of the old formula.
I love the fact that West Wing pointed out several years ago that the poverty formula wasn’t so good.
So where did that old formula come from? And for that I will use West Wing again. Here Sam talks to Bernice from the office of management and budget, about where the old formula came from:
SAM: Well how was the old one reached? The current one.
BERNICE: In 1963, an eastern European immigrant named Mollie Orshansky, who was working over in social security, came up with it. Food was the most costly living expense where she came from.
SAM: Our cost of living formula for the last 40 years has been based on life in Poland during
the Cold War?
BERNICE: This is what I’m talking about. I mean, food doesn’t account for one-third of a family’s budget. Housing is more expensive than food. The current model also doesn’t take into account transportation and health insurance. So let’s call the current model the old
model and sign off on the new model.
Ok. Sorry. I digressed because I loved West Wing and I often find it addressed many issues we are addressing today.
Anyway. The new definition.
One day someone wasn’t poverty stricken and the next they were.
Oh.
And one day someone was poverty stricken and the next day they weren’t.
Yikes.
Here is the graph:
New poverty versus old poverty/IBM: http://www-958.ibm.com/software/data/cognos/manyeyes/visualizations/new-us-poverty-v-old-us-poverty
Ok.
Let’s be clear. All the people wandering in and out of the new and old poverty statistics are struggling in some form or fashion. What moves someone out of poverty (I believe this is the definition) is that they have “attained a level of income where discretionary purchases are enabled.” In other words … it seems to define a line between ‘deprivation’ and sustenance. A good line in my mind. Well. Not good … but fair assessment.
Now. I am not clear on how discretionary discretionary is but suffice it to say that if I were dropped to whatever the number was that was slightly above poverty I could make no discretionary purchases … in fact … I would have to completely reassess all my spending & living behavior.
But.
This isn’t about me. And this isn’t really the way we (USA) is defining poverty … what I suggested above is how global poverty is defined (in a broad sense)
This is about redefining USA poverty.
Sometimes I believe we go number crazy.
Should we care what the number of people living in poverty is? Well. Yeah, I guess so. I imagine it gives us some measurement with regard to how Americans have the ability to live the ‘american dream.’
And I think that is good.
Ok. That said … this redefining is weird.
The government is making the definition of poverty pretty odd … it eliminates any connection between poverty and “deprivation” — by reclassifying poverty as being all about “inequality.”
The Heritage Foundation states:
Under the new measure, a family will be judged poor if its income falls below certain specified income thresholds or standards. There is nothing new in this, but unlike the current poverty income standards, the new income thresholds will have a built-in escalator clause. They will rise automatically in direct proportion to any rise in the living standards of the average American.
The current poverty measure counts (albeit inaccurately) absolute purchasing power (how much meat and potatoes a person can buy). The new measure will count comparative purchasing power (how much meat and potatoes a person can buy relative to other people). As the nation becomes wealthier, the poverty standards will increase in proportion.
So.
Does this mean 15% of US is in full deprivation mode within the new definition? Nope.
Just means a lot of people aren’t living the American standard of living.
Weird? Yup.
But let me move on from that nonsense …
Frankly, when I see numbers like 15 to 20% of Americans living within some band of poverty levels (however it is defined) … well … that doesn’t seem right.
No. in fact I am sure. It is wrong.
I do not believe in income leveling (or redistribution).
But I also do not believe a country as wealthy and healthy as ours should have anything more than single digits in poverty (I am going to assume for assumption sakes that 0% is impossible just due to some people not making any effort to not be poor).
And the US Census poverty redistribution made it more clear that more older HHlds and more white HHlds are wallowing in some sort of poverty/wealth constraints than ever before.
OLD NEW
All People TOTAL 46,602 15.2 49,094 16
Under 18 years AGE 16,823 22.5 13,622 18.2
18 to 64 years AGE 26,258 13.7 29,235 15.2
65 years and older AGE 3,520 9 6,237 15.9
Do I have a solution? Nope. Certainly not an easy one.
But I do have a thought.
Many of us sit around moaning about the economy and paying our bills and saving for the future. Well, my friends, there are a shitload people out there who have it a shitload worse.
And, by far, they are not lazy nor untalented (things often associated with the words ‘living in poverty in the USA”).
We need to find some solutions.
I say that as I also struggle with what exactly is poverty in the united states.
I do know if you want to see real poverty you don’t go to a Walmart.
You should visit one of the slums surrounding a Latin American/Caribbean or African major city (maybe even a major European city … like Paris).
And while you’re at it, visit a solidly middle-class neighborhood. By American standards, those neighborhoods would be poor, but they are neat and orderly neighborhoods … built and maintained with pride (regardless of their income level).
In those neighborhoods the residents are thrifty, hardworking, and well-mannered as well as determined to give their kids a good education.
Suffice it to say that people with lower ‘on the cusp of poverty’ levels of income in non-USA countries have a different attitude with regard to how to live and maintain every day life.
America is unique in respect to its view on poverty.
But who cares (no matter how absurd our definition may be).
The fundamental question is “why is a poor person poor?”
Generally a person is not poor by choice, the grace of God or some fault of his own.
A person is poor typically because he is denied opportunities.
To solve poverty we need to get to the root of the problem. The deep-rooted causes of deprivation, starvation, and social and economic exclusion need to be addressed.
We need to look beyond the dollars & cents and seek to better understand the social inclusion/exclusion aspects of poverty.
The social inclusion approach helps identify the processes, social relations, and economic and political arrangements in the society which contribute to poverty and, therefore, we would have a better opportunity to begin building solutions that provide attainable opportunities so people can rise above poverty/deprivation.
All that said … maybe looking at numbers like this does matter.
Because when I see something like 15.9% I see a large enough group that it should matter … to you & me.
the appeal of ron paul
Jan 6th
So.
I typically don’t write about politics because, well, I typically believe if you don’t have anything nice to say don’t say anything at all. In addition politics-speak makes my head hurt. Its kind of like listening to a new business guy called the ‘king of Babble-on” (Babylon so you get the full reference).
It all makes my head hurt.
But last night, as I skipped away from another college bowl game where I wasn’t sure there was a defense anywhere on the field, I went to Piers Morgan on CNN (by the way … CNN may have 2 of the best news commentator shows on tv today … Fareed Zakaria and Piers Morgan … balanced by one of the worst .. Anderson Cooper … but that is a different article).
Piers was interviewing Ron Paul.
Now.
Because I don’t pay attention to all the deep politics stuff my perception is Ron Paul is a quasi-out of touch old guy. In sound bite form some of his opinions have made me sure America would be better off without him leading.
But I stayed tuned to Piers and listened.
Ok.
And when you hear something like this … well … how can you not find him appealing as a leader of America?
“There is only one kind of freedom and that’s individual liberty. Our lives come from our creator and our liberty comes from our creator. It has nothing to do with government granting it.” – Ron Paul
And soundbites aside.
yeah. He is an old guy …. but he talks “young” and he talks in a common sense way (although some of the things he says stretch reality sense).
He talks like you and I.
And at his foundation in thinking he thinks stuff we think.
Directionally he uses plain words I can understand, he clearly has a vision and, maybe best of all, he tends to not linger in the ‘gray.’ And maybe that is another thing I found appealing. That lack of gray. He takes black & white stances which are often quite contrarian to the traditional caveated “win me a vote” point of view. Do I agree with all he said? Nope. But for gods sake the man had a point of view.
Best of all? … well … he doesn’t act like a politician … he acts like someone who doesn’t care about being liked or disliked … he acts like someone who just wants to do what he believes is right.
The interesting thing?
The way Ron Paul has captured the attention of 20somethings (which is another thing I find appealing … because I often believe true leaders are in the Hope business).
But maybe I shouldn’t be surprised because change (and plain speak) is exactly what people that age are looking for. And probably the first thing many young people see is an anti-war candidate.
And while some (mostly older) people are wary of Ron Paul’s isolationist policies I have to assume middle America finds it appealing as they worry about our own economy and their own troubles.
At the end of the interview?
I have to be honest.
When I hear him speak, and fully explain beyond simple soundbites, any major reservations I have become less major.
He certainly has sincerity and honesty. Plus who throws in a strong dose of truly understanding the intent of the Constitution (way better than any supposed “Tea-partier”):
“Our country’s founders cherished liberty, not democracy.” – Ron Paul
And he has a sense of real economics (although some of his economic steps seem a little unrealistic).
Oh.
Predictability. He’s very predictable and his vote record seems to always be consistent with following the Constitution.
I have no idea whether I could actually vote for him but people should seriously consider him. And the fact that I am writing this is not an endorsement.
But. I was wrong.
He isn’t a nutcase nor is he out of touch.
And he speaks English rather than political gobbdlegook.
And he is using the political system perfectly. He is certainly not a Republican and yet he is in every Republican debate. And he is certainly not a Democrat. And I have always believed that given the world and the situation we are in that the true solution to our government deadlock mentality is the rise of a 3rd party (history has shown that to happen in American politics so I am no soothsayer on this). And he is using the system to create a 3rd party without truly stating a 3rd party.
With that said … I predict he doesn’t win the Republican nomination. And then he enters the election as the third candidate (ok … I assume the Communist party has candidate but since Gus Hall died I have no clue who it is). And then? Gosh. Who knows.
In the end? It was a better use of my time then a bad bowl game.
economic center of gravity
Jan 4th
There is an awesome study completed in late 2010 called “Global Economy’s Shifting Centre of Gravity.” Ok.
Maybe not awesome to some people … but to me? Fascinating reading (I actually read it over my vacation which included some cocktails while reading & making notes).
Here is the net:
- In 1980 the global economy’s center of gravity was somewhere in the middle of the Atlantic ocean.
- In 2010 the center of gravity shifted to just east of Helsinki/Bucharest latitude (oddly the longitude doesn’t seem to vary much over time in this modeling).
- In 2049 the center of gravity will shift almost two-thirds of the earth’s radius from the 1980 center to somewhere say in west Asia.
All that said … I would envision most people wouldn’t be surprised by this.
But there are some nuances to this study that should make people think a bit.
Its ok. I am not going to go into the modeling analytics … but suffice it to say this guy knows his shit and figured out a way to analyze economic power not by clustering (which is an important distinction) but rather center of gravity (it’s kind of like figuring out how to measure the dynamic behavior of spatial economic distribution rather than simplistic clustering).
He created some awesome (to me) cylindrical spatial global maps in which it is almost like viewing an economic holographic image.
I will spare you.
What I won’t spare you is what this means.
The income dynamics of the average location of the planet’s economic activity is shifting.
I think we all knew this in our gut but now we have actual proof. And its kind of sobering proof for those of us in this hemisphere (I include South America, Latin America and North America into this pot of people).
That global economic activity moves east in this graphic fashion shows the rapid growth in incomes going to the large chunks of humanity who live in India, Africa, China and the rest of East Asia. (note: population itself changes much more gradually therefore this sharp east-directed rise of the rest is not driven by population growth.)
Overall this shift is a reflection of a lot of good happening in the world. For example 600 million people have been lifted from extreme poverty – a large and rapid improvement in the well-being of humanity that is unprecedented in the history of this planet.
And there is more is to come.
In particular, Africa and China will remain growth areas (albeit each in different ways).
Now.
All of this could be interesting/concerning in a variety of ways.
First.
This isn’t just about money, or income, this is about power. Economic shifts lead to governmental shifts … and intellectual shifts.
Second.
Let’s talk “intellectual shifts.” Eliminating poverty (or limiting poverty) means releasing probably the greatest restraint to education. And mind power is the great equalizer.
Sorry folks … it isn’t democracy (or any real ‘freedom of’ … although some people may debate the cause/effect of that relationship). When economic shift permits an elevation of intellectual power that tends to be the formula for sustained shift in economical gravitational pull. Regardless of the type of government oversight.
I even have a historical example on economic opportunity (and how governmental shift is not enough) … and economic opportunity lost.
We have faced a similar foundational economic re-construct situation before … only to have the economic center of gravity remain skewed toward the western hemisphere. And although the economic center of gravity was challenged at that time … there wasn’t the intellectual shift attached to the economic shift to sustain the movement.
Let’s look back at the last time we may have faced something like this.
The cold war. Soviet Union versus United States (actually … the rest of the world).
The reality is that while Russia tried to fill the void (of prosperity … or maybe better said … ‘better than what is’) and sought to increase its empire-like global perspective under the guise of government doctrine … it was actually an economic battle. Think people labor versus capitalism (simplistic but you get the point).
Russia was certainly good at destroying governments and economic construct. However because of their economic corruption they were unsuccessful in replacing what they destroyed.
Ultimately that was their failure … not a failure of communism but a failure of economy first and foremost. And, in the end, their failure to sustain an economic shift meant that the intellectual power was never maximized.
I promise you that mistake will not happen again. In fact it is happening all over again … but the economic shift is being sustained.
There are three (to me) primary locations pulling the center of gravity. And I will outline each (and why we in the western hemisphere should sit up and pay attention).
The three? China, Russia, Africa.
China.
They don’t necessarily destroy governments and economies. In fact they do the opposite.
They simply take less than successful scenarios and through economic success makes each … well … more successful.
Ok. There is a point here.
What most Americans (let’s say ‘outsiders’ in general) fail to see is the “more successful” part. Many people measure success off of what we have (or how high is up).
In fact it is through those eyes that we damn China today.
Take a step back.
As Mao suggested for China … success would be enabling the majority to afford another pair of shoes.
Not a mansion .. heck .. not even a house … just another pair of shoes … for a gazillion people.
And he did it.
And China has continued to grow.
Sure. It becomes more difficult from there. But that’s not the point.
Other ‘industrialized’ countries measure them in a different way.
And are being foolish by doing so.
China is being successful (for a number of reasons) but because they have taken what they have done well internally within their own country (helped a segment make the next step up) and go elsewhere and offer the same opportunity.
They are creating an infrastructure within emerging countries, and emerging economies, to ‘be better than what is.’
In Africa it is transportation and communication interface. In southeast Asia its internal infrastructure.
China is becoming an enabler rather than a destroyer.
Russia today.
In 2011 Russia released a list of more than five thousand strategic assets to be turned over to the private sector to operate instead of the government. This quasi-communist country is now privatizing.
And in Africa the picture continues to improve.
Wars have subsided and governments have stabilized and they are also adopting their own quasi capitalist-communist economic attitude, i.e., private subsidized by government.
Their average GDP has consistently grown almost 5% annually (actually 4.9% between 2000-2008).
Over the past 8 years over 80 million households have been elevated above poverty level – to a level where discretionary spending commences in the household. Telecommunications, banking and retailing is flourishing.
This reflects a significant rise in the African urban consumer. In 1980 28% of Africans lived in an urban environment and today 40% do. In countries where infrastructure is isolated, typically in more urban environments, this means that a more significant portion of the population has access to education, skills development and jobs.
In addition, African governments are increasingly adopting policies to maintain the economic growth as they privatize state-owned businesses, open lines of trade (foreign), strengthen legal systems and provide well needed physical & social infrastructure (a byproduct of that last factor is an increased labor force and economic distribution among the population).
So.
Having used those examples maybe I am maybe actually suggesting the bigger thought is a new communist-capitalism attitude shifting the economic center of gravity (I am erring on the side in my point of view that USA isn’t doing something wrong but rather that others are doing something well).
I do find it impressive that traditional & evolving governments have attained this balance of communism embracing capitalism.
Historically, the two are ideologically irreconcilable. Yet even the traditional communist based governments are proving to be quite pragmatic in supporting pro-growth economic policies (by non traditional communist means).
China has unapologetically stuck to communism in every other sense of government policy (and Putin’s Russia certainly leans in that direction as well as a number of more dictator/authoritarian based governments in Africa). Yet these quickly growing economies are characterized by low, stable business tax rates, responsible government spending, reasonable levels of regulation and incentives for business expansion.
As a result, their economies are expanding, businesses are thriving …. and maybe more importantly … the population is gaining a better way of living.
Once again … in my words … better than what they had.
Yes.
It is interesting to me that it is the economies of communist (or communist like) governments are thriving due to capitalism and responsible pro-growth economic policies.
And because of all that we are seeing a shift in the economic center of gravity.
Anyway.
Sorry. I digress.
Ok. Getting back to the center of gravity.
This study reflects how we should be looking at things. Millions of millions of people in developing countries are becoming more wealthy.
Exorbitantly? Nope.
Wealthier? Yes.
Simply moving all developing countries (or the majority … call it a ‘large mass’) to non-poverty from poverty is a massive shift. And by doing so it enables that population to be more productive. More healthy. More educated. More knowledgeable.
This funny Maslow chart reflects that as additional personal needs are fulfilled it induces new needs (which we, as humans, constantly improve ourselves in order to further attain these ‘self actualization’ activities). Think about this from a non-funny sustenance perspective in growing from poverty to non poverty (but the dimension perspective will always reside in the human mind).
This is simple shit.
But we in the ‘industrialized world’ get caught up in the wrong issues … we assess success by where we are today .. (silly silly people).
Ok.
Be careful with what I say next.
While USA focuses on government constitutional aspects and “enhancing their constitutional situation” … China is focused on economy.
Now.
I am a HUGE freedom of guy. But. If you want to grow and expand your government/country/culture more … a good economy is a really good thing.
But having a realistic point of view on economy is an even better thing.
Maybe if we look at the shifting economic center of gravity here in the western hemisphere we shouldn’t look at it as a loss of stature but rather maybe we should seek to gain some learning.
Is this post a message to our government and regulators? Nope.
This is a message to you & I that we have it pretty good here in the good ole USofA.
Is it as good economically as it was? Nope. Is it good? Yup.
It’s an attitude issue for ‘we the people.’ Because with the right attitude then we can create the right behavior.
But that is my next economic article.
A rant on the everyday American’s economic behavior (because other cultures aren’t as addicted to spending as we are).
Hope you enjoyed.
Pravda, Putin & Poverty in the USofA
Dec 15th
The new Economist has Putin on its cover and it made me think about checking out what the Pravda had to say.
God almighty I love taking a couple of minutes and reading the Russian paper Pravda online every once in awhile.
As a reminder. Pravda is kind of like russia’s version of USA Today (someone at USA Today is cringing at the moment). I say that to remind us that a lot of people read it and it has that same ‘people magazine like’ writing style.
Anyway.
Pravda is all in a tizzy on a variety of issues. And they pull no punches when they feel strongly about something.
First.
Lies on SKY: The British Media Circus comes to Russia (note: someone there should get a raise just for writing this headline).
Right on cue two days before Russia’s Parliamentary elections, comes SKY News. Are they following terrorists, interviewing rapists, glorifying murderers and taking sides? Are they asking Americans in Iraq if they are looking for revenge for 9/11? Why no, they are muck-raking in Russia’s vast interior, painting a negative image of Vladimir Putin.
Awesome stuff:
http://english.pravda.ru/opinion/columnists/02-12-2011/119825-british_media_circus-0/
look.
I have mixed feelings about good ole Vlad the Impaler 2012. Every time I read about him or hear him speak I think about the song “Cult of Personality” (an awesome song): http://www.youtube.com/watch?v=7xxgRUyzgs0&ob=av2e
Anyway. I digressed by including that video so back to the point of the post. Pravda.
Having cult of personality is a fine line in leadership. I happen to believe Russia needs a charismatic leader to re-position itself in the global economy. And what I mean by that is that a strong leader can help Russia get its mojo back. Help it have a clear identity and regain some of its “mother country” swagger and belief system.
Putin the right guy? Shit. I don’t know. They probably scoff at Obama. I don’t have the right to choose for them. However what I do know is that Putin is polarizing and sometimes polarizing is good. What I also know is that the Pravda defends him (albeit their communist roots are showing).
Anyway.
The article was worth a chuckle.
And if you have any doubts … here is a soundbite … “In the sewer where the British media resides, pride of place in this festering cesspit, alongside the British Bullshit Corporation, must be reserved for SKY News, where lies on SKY abound, where stories are turned around or upside down, where gross manipulation rules the day and where insinuation goes hand in hand with reporting what are supposed to be facts.”
(journalism at its best)
Next.
An attack on capitalism using Foreign Affairs magazine as its main source (which, frankly, is a really smart move on the columnist’s part) and highlighting USA’s poverty.
Quote: Since then, bribery has become common practice. In 1971, there were 141 companies represented by lobbyists in Washington. In 1982, there were 2,445.
Geez.
He makes a good point (commie bastard).
http://english.pravda.ru/society/stories/22-11-2011/119709-Capitalism_and_poverty_in_us-0/
I guess this article reminds me why I like reading foreign news articles. Even if they are opinion articles. I sometimes believe it is quite easy for us Americans to throw stones at others (despite our own issues). So this article throws a nifty sharp edged stone at America using the ‘communist stance’ point of view to make us think about our issues.
And as with any good read there are aspects of truth (as well as some blurry edges).
Reading this article I can very easily see how communism (in its public relations form) could be very appealing to a lot of people.
And I can also see how when the Communist PR machine was working on full cylinders (albeit I believe the infamous Lada only had 4 cylinders) it created some compelling intellectual debate amongst socialist, democratic and any non-communist driven country.
In fact. I would imagine many americans living here in the miserable now reading this would be quite tempted to say “why not?”
(now … that is a scary thought)
Ok.
Here is the Pravda home site. Take a minute.
Is the news skewed or truly reflective of what the typical Russian thinks? Geez. I don’t know.
But. As I have said before.
A LOT of people read this paper.
And I have to assume a LOT of people believe it.
And a LOT of people’s point of view is framed by what they read here.
http://english.pravda.ru/russia/
At minimum it is fun reading.
getting different points of view
Sep 16th
Whew.
If you ever want to get a really different point of view go read the Pravda (a Russian newspaper. http://english.pravda.ru/). The newspaper was originally the voice of communism and while it currently claims to have no resemblance to the original communist Pravda its mission remains “to report the truth and nothing but the truth” (Pravda means truth in Russian). And. It still leans mightily toward a pro-Russian/communist point of view (just as say a NY Times leans mightily toward a pro-American/democratic point of view).
Anyway.
I cruise the Pravda website on occasion and their columnist editorials never fail to screw my head up.
Their point of view on a variety of topics will make your head spin.
They write about the Caucasus (which I will comment on later).
McCain … this one is a real headache maker .. “the bleating of senile old goats” should inspire you to take a look at this one … http://english.pravda.ru/opinion/columnists/25-08-2011/118867-senator_mmccain-0/ …)
Moslems.
Oh. And Libya … On one side of the divide, the Satanic and dark forces of NATO and on the other side, those who see themselves as the guardians of what is right and good and just. It is good versus evil, it is God versus Satan, it is about implementing international law.. http://english.pravda.ru/opinion/columnists/31-08-2011/118919-libya_truth-0/)
Yeah. There is stuff in this paper that will truly make your head spin.
And at the same time make you think a little … a little about “how much does our own media spin the story?”
For wouldn’t we be foolish to completely disregard what we read in this paper (named Truth)? At minimum there should be a grain of truth in what they write and in their opinions.
And, also at minimum, millions of Russian readers are reading this paper and, similar to the USA, millions of points of view are being molded by what they are reading.
And maybe that alone is a good reason to read foreign newspapers on occasion. If only to be exposed to what other people are creating points of view from.
Yes. We may scoff. We may scratch our heads in disbelief. And we may even believe it is all blarney.
But it is news to someone.
And a lot of someones.
And a lot of someones who are building their own points of view on things.
And if we were the ones reading it every day there would be a boatload of people right here who would be taking it as unassailable fact and truth.
Ok.
And then I read the following article about the Caucasus.
And of all the seemingly insane points of view I read this one hit with like a hammer of sanity.
We in the USA very quickly jump to the popular (and in theory I also like it and agree with it) self determination theory (likeminded people creating countries) when discussing the dissolution of the old Soviet Union (Russian and extended ‘states’).
But, honestly, there is a practicality which eludes us when discussing it simply in platitudes.
And this article did a nice job of pointing out some really practical issues.
Practical issues surrounding country/geographic boundaries. And in bringing that up it seems like we should have some facts as we grapple with this topic. Some background.
The Caucasus a geopolitical region at the border of Europe and Asia. It is home to the Caucasus Mountains, including Europe’s highest mountain (Mount Elbrus).
North Caucasus comprises:
* Chechnya, Ingushetia, Dagestan, Adyghea, Kabardino-Balkaria, Karachai-Cherkessia, North Ossetia, Krasnodar Krai, Stavropol Krai
South Caucasus comprises:
* Armenia
* Azerbaijan (including disputed Nagorno-Karabakh)
* Georgia (including disputed Abkhazia and South Ossetia)
I believe the article below focuses on North Caucasus region which has about 5.5 to 6 million population, at least a dozen languages, a lot of raw mineral wealth, high unemployment and a lot of confusion about its desire for independence (because Chechnya desires an independent state and the other components have not expressed a large desire to be independent).
The article:
Russia may bid farewell to Caucasus?
The program for the Development of the Northern Caucasus in 2012-2025 prepared by the Ministry of Regional Development stirred up the “separatist” wave in the society that threatens to erase once and for all Adygeya, Dagestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia, and of course, Chechnya from the map of Russia.
The “pro” arguments are well-known: 1) we feed them (huge subsidies from the federal budget; 2) they are blowing us up (the Caucasus as a permanent source of terrorism), and 3) they do not respect us (a number of facts ranging from ethnic crime to the national dances at the Manege Square).
Certain circles believe that only radical measures will solve all aforementioned problems in one swoop and then everyone else will be happy. The “separatists” do not bother with the practical side of the issue of the construction of the “Great Caucasus wall.” It is very simple: strip them off the Russian citizenship, move them out of Russia, install a barbed wire fence and ban the re-entry.
It is hard to come up with a better excuse for a civil war. Does anyone think that the process of disengagement will be quiet and peaceful? It would seem that the example of the “independent” (factually) Chechnya of 1996-1999 should have once and for all shown that even being separated the Caucasus would not leave Russia and would not dissolve. On the contrary, the following would happen:
- The power on the rogue territories will be taken by the rogue, whose raison d’être would be a constant battle with the hated neighbor. This means that at least chronic border disputes are guaranteed;
- There will be an endless series of lawsuits against Russia with territorial and property claims, with the full approval and even whole-hearted support of the Western countries;
- The final solution of the “Russian issue” in the North Caucasus will be just around the corner. Objections that there is no Russian-speaking population left there are not true. Besides the nearly mono-ethnic Chechnya, there is Adygea where the Russian population is the majority (approximately 65 percent), and Russian Mozdok in North Ossetia, as well as numerous Cossack villages scattered throughout the region. In a full-scale conflict aggravated by a forced relocation, the Russian-speaking inhabitants would perish first.
Separatists from other autonomous regions such as Tatarstan and Sakha Republic will get an example to follow. The country will experience the formation of the notorious “fifth column”, this time capable of blowing Russia up from within. The new “foreign countries” will be happy to help.
I repeat: we can certainly say goodbye to the Caucasus, but it will not leave us. The desire to wait it out behind the proverbial wall is equivalent to the decision to lock oneself in the apartment and not go outside because there may be hooligans there. If someone does not want to abide by the rules of human coexistence, it is necessary to punish the rogue specifically, without making global generalizations.
It is even stranger to call this position “patriotic.” Patriotism, for those who do not know, in ancient Greek means “fatherland” and dictionaries treat the term more broadly – “the love for one’s country.” Dr. Samuel Johnson who uttered his immortal “Patriotism is the last refuge of a scoundrel” in 1775 meant that the scoundrel has still some hope if he loves his country.
It seems that in the 21st century the aphorism of Johnson is turned the other way around. Patriotism in a distorted understanding has truly become a refuge for scoundrels, for it is a very convenient cover for stupidity, cowardice and betrayal behind the hypocritical mask.
Stupidity – because there is no simple, painless and effective mechanism to remove the Caucasus problems. Have people failed to learn from the last parade of sovereignties? First we said goodbye to the “unnecessary” Baltic States, then bid farewell to the Soviet Union.
Cowardice – because the withdrawal from the Caucasus can be described by a brief, but telling slogan – “Holes instead of mountains.” Betrayal – because even though Russia is great, there is not enough space to retreat.
Ok.
Excellent article. Makes you think. Maybe enlightens a little.
And I love the fact a Russian editorialist quotes Samuel Johnson of all people.
This all seems to have come to a head not through anything Chechnya did but rather in January 2010, the Kremlin announced the establishment of the North Caucasus Federal District (which includes all the republics of the North Caucasus except Adygea). With the creation of that district the North Caucasian republics were separated from the Southern Caucasus (and united Northern republics under one federally administered district). The explanation behind this move was that it would allow for better focus to be paid to addressing the shared problems across the republics of the North Caucasus. However, this decision could also be seen as an attempt to improve the effectiveness of Moscow’s financial support to the North Caucasus, and ultimately a step toward establishing the region’s financial independence from Moscow, which has become particularly urgent considering that Kremlin funds are becoming increasingly stretched due to economic constraint and its costly development projects.
Other theories have been stated to explain the move but suffice it to say none of this kind of detail enters (r very rarely does) into our discussions here.
To us Americans is “give them freedom.”
And it really isn’t that simple.
Is the Pravda giving us “the whole truth and nothing but the truth?” I doubt it. But does it give us something to think about?
You bet.
It is always good to see what other parts of the world think.
It is always good to at least know other people’s points of view.
different point of view part 2
Sep 16th
Ok. I admit. I haven’t picked up a (Time or a Newsweek magazine in a very long time. I read the Economist and the Guardian and Pravda and Financial Times (among several international rags) to get a global perspective. So when I picked up a Time magazine out of curiosity it provided a slightly different perspective for me.
This one has “the decline of Europe” on its cover. And I picked it up because it was so obviously American focused versus what I currently read. And it was enlightening in its perspective. Did I learn anything ? Nope. But the perspective was interesting.
And while a lot of people could get grumpy with me I decided to put this post right after my Pravda post. Because it makes the same point.
Whether we like it or not, even in the flat world of internet and youtube, our media shapes our point of view.
We may dislike what we read in the Pravda but what makes our media “righter” then theirs. But more importantly. It shapes the majority’s thinking. It is just a guess but the readers of my site are a minority. We happy few probably scan a variety of global perspectives and develop our own point of view.
But. We are a minority. We aren’t any smarter than other people. We are just different.
The truth is the majority of people read only Pravda (Russian), or Guardian (English) or USA Today (online or paper) … all depending on one’s locality.
And the reader doesn’t cross over. And most readers only get one perspective.
And because that is what most people take in that is what they put out in perspective.
Anyway. I read Time magazine. And it was odd to me. Because all of a sudden Europe was crumbling (because usa wasn’t there to prop them up) and a variety of issues they were facing suggesting they were screwed (Europe).
Note: that was a very simplistic recap of a long well written article …
Do I agree? No.
Do I sort of agree? Sure.
They have a nifty graph (which the economist has never shown) showing relative economic strength by country. I cannot show it because I don’t subscribe to Time online but suffice it to say they rate countries where Scandinavian countries move up into the positive upwards left side quadrant and as you move left to right you get Germany, then France and then USA (which isn’t as far to the right lower bad quadrant where Italy and Greece reside.
In the chart I will ignore the quasi socialist Countries (Scandinavian) because … well … they are quasi socialist (which while we in the USA get nervous with that word it simply translates into less economic highs and lows because of the inherent wealth distribution).
Anyway. Looking at the graph truly made me think about what is happening globally and why it is happening in each country.
And while it is certainly a complex combination of factors and issues I felt like cutting to the chase rather than get hung up on politics and government and taxes and whatever.
The easiest way to say what’s happening.
Germany good. They make a lot of shit.
USA not so good. We make some shit but generate more money in intangible services (we use money to make money).
Greece. They don’t make shit (except olive oil).
That said.
If you want to be depression free, make shit. That is my economic lesson for the day.
story of 2 americas part 1 – the haves
Apr 26th
So.
This is a story about 2 Americas and the recession.
This is a story about the haves and the have nots.
PewResearch calls this the story of the “One Recession, 2 Americas.”
And this article focuses on the ‘haves.’
Ok.
Let me begin with the fact that a lot of people are making a lot of money writing points of view on the effect of the recession on people’s behavior. And while I am not making any money on the topic I surely have written my point of view on the ongoing behavioral effect the recession will have on consumer shopping.
What I do know for sure is that there have been a lot of sweeping generalizations.
And I also know for sure that the media hasn’t helped in forging a quasi-untrue belief that the recession has affected everyone’s behavior and crippled the economy.
But.
It hasn’t.
A little less then ½ of American households are holding their own (and behavior wise aren’t doing a whole lot different than they were before). I have research to support that statement (although I believe it without research).
Ok.
I am going to try and make two points here. First is on current behavior. And second will be what current behavior means to ongoing (future) behavior.
First.
Current behavior. Let’s try this factoid out to maybe reset everyone’s thinking a little.
45% of Americans said they have “held their own” during the recession (PewResearchCenter 9/10).
This 45% of Americans have made some different fiscal decisions but the majority has done nothing differently (per the research).
Look. I am not suggesting that 55% saying they were affected should be ignored (and in fact my next post will be about them) but I am suggesting that there are a boatload of people who are just humming along like they have always been doing (and many are hiding their behavior out of guilt in front of the other 55%). And I do recognize that this study didn’t deeply measure all the attitudinal things that come along with a recession so I imagine even the 45% of America thought some ‘fear’ things and probably were more cautious about expenditures. But the research shows some interesting things about this group that represents almost half of America:
- Only 4% of this group say they have increased debt to pay bills
- Only about 30% said they have cut back on the amount they are saving
- About 50% of this group said the single biggest adjustment they have on their lives is changing some spending patterns (“we cut back on some luxuries & vacations” – me: didn’t eliminate – “we eat out less often”- me: didn’t eliminate)
Note: Pew calls this a minor adjustment
- As for ‘major adjustments?
NO (that’s zero to all my readers) members of this group say the recession has “caused them to make any major changes in the way they live” (yikes). Yes. 45% of Americans made no major adjustments to their behavior.
- Halfway into the 3rd year of a recession 50% of this group report they are “living quite comfortably” (thank you very much)
Just some interesting things before I move on (just some factoids).
This 45% is more likely to live in suburbs & rural areas and on the east coast, be older, higher educated and more affluent.
Ok. Basically “the haves” (the upper & upper middle income) pretty much was sheltered and lower middle class and lower income got screwed (but that is a different post about the increasing split between the haves and the have nots).
Next.
Ongoing behavior.
Let’s think about some of the implications from the current behavior research information.
Basically 45% of America hasn’t changed current behavior.
So common sense would tell you that their ongoing and future behavior won’t change.
The haves will continue to “feed” the American “can do” spirit and “bigger/more is better” attitude. And, oh by the way, they will continue to grow and increase the gap between themselves and the have nots. At an increasing speed. Yes. This 45% will foster whatever positive growth arises from the recession but they will benefit more so (and foster a very healthy luxury segment to the dismay of the have nots).
Let me finish this thought by saying 45% of America is a boatload of people.
Mucho people and mucho money.
Not to say 55% isn’t a bigger number but 45% ain’t nothin’ to sneeze at (and they represent a disproportionate percentage of the overall American wealth).
So before you say “the recession has changed the way the business will be conducted forever” just take a moment and remember … 45% of America doesn’t seem to have changed a bit.
Looking ahead.
My next post is about the “have nots” or what the PewResearch calls “Lost Ground” (the 55% of those who seem to be truly affected by the recession).
the story of 2 americas part 2 – the “have nots”
Apr 26th
Ok.
Back to the story of the 2 Americas. This is chapter two.
As a reminder. The Pew Research Center released survey results titled “Two Recessions, Two Americas.” The Pew pollsters asked people about their economic wellbeing during the recession. Interestingly Pew found that America fell into two distinct groups — one that had multiple financial setbacks since December 2007 (“Lost Ground”) and another that reported they had held their own (“Held Their Owns”).
Chapter one was on the “haves.” The 45% of Americans that clearly stated they were doing just fine (thank you very much) despite the recession. (PewResearch 2010)
Chapter 2 is about the other 55% of America. The group that Pew refers to as the “lost ground” group. (same research source)
Let’s call them the “have nots.”
Look. I fully understand that nobody was untouched by the recession that began in December 2007, but this 55% has been hit hard.
Very hard.
The have nots, this 55 percent, well, this is a tough one in the US because this has been coming for awhile in US (as well as most developed countries).
“This” is the increasing gap between the haves and the have nots. The recession has simply exacerbated the situation.
Exponentially speeding up the size of the gap.
It’s a fact.
According to the statistics of the US government, over 32 million people (12.7 percent of total US population) live under the poverty line.
Just to make a point. This incidence of poverty is higher than in the 1970s and higher than in most other industrialized countries.
So. The “lost ground” 55 percent has not only lost ground but in losing ground has started the slide into a hole. A deep hole.
A poverty lined hole (a hole that has very slippery sides and no hand grips).
In other words. An incredibly difficult hole to climb back out of as the economy and their situation improves.
And (even worse) beyond the recession there several things that are going to keep them in the hole (versus say when we came out of the great depression).
Oh.
And it won’t be the increased gas prices (I wanted to take on the economic media darling first). Because we do have transit. Cars are a choice. Gas simply creates a change in behavior and choice (no matter how much that may kill us).
So what’s gonna keep the majority of the current ‘have not’s in the hole?
Basic living will cost more.
The biggest culprit (keeping them in ‘have not’ land)?
Rising food prices.
It’s the basics that will hold them down. The basics are going to cost more. Over the next 10 years food costs are expected to increase 4% annually outstripping the expected consumer growth (real GDP only 3%).
Seems small difference … but has big repercussions.
It may be surprising to many people but a great number of Americans suffer from poverty and hunger. An investigation by the US Department of Agriculture in March 2000 showed that 9.7 percent of American families did not have enough food. At least 10 percent of families in 18 states and Washington D.C. often suffered from hunger and malnutrition. In 1998, 37 million American families did not have enough food.
Ok.
Next (that will attack the basics of living).
Inflation. It’s on the way. Not extraordinary levels but enough combined with rising food costs to continue to chip away at the basic cost of living.
Will the inflation be crippling? Nope. But it’s like basic living is dying a death of a thousand small cuts.
Next?
Unemployment will remain higher than during the boom.
We will have to learn to accept the fact that while 10% unemployment (kind of like the Mendoza line of unemployment) will not be the norm, 6-8% could certainly be here to stay.
Anyway.
All of these things will not only maintain this big gap between the haves and have-nots but will exacerbate the situation.
The gap between the rich and poor has widened and the living standards of the labor force have gone from bad to worse. The ongoing issues of poverty (and poverty level living), hunger, medical services and homelessness continue to prove difficult to solve.
Some have and have-not gap factoids:
- The gap between the rich and poor in the United States grew at the same pace as the economic growth. Statistics show that the richest 1 percent of the US citizens own 40 percent of the total property of the country, while 80 percent of US citizens own just 16 percent.
- Since the 1990s, 40 percent of the increased wealth went into the pockets of the rich minority, while only 1 percent went to the poor majority.
- From 1977 to 1999, the after-tax income of the richest 20 percent of American families increased by 43 percent, while that of the poorest 20 percent decreased 9 percent, allowing for inflation. The actual income of those living on the lowest salaries was even less than 30 years ago.
The bottom line is that the gap between the wealthiest Americans and the poorest is bigger than at any time since just before the 1920’s Depression. According to an analysis this year by Edward Wolff of NYU, the top 20 percent of wealthy individuals own about 85 percent of the wealth. And the bottom 40 percent own very near 0 percent.
Many in that bottom 40 percent not only have no assets … they have negative net wealth.
Just think about that 40% number for one second.
Now. While the numbers are not exactly apples-to-apples all of what I have typed so far suggests that 55% of America clearly is falling into the “have not” group and almost 2/3rds of that 55% have NEGATIVE net wealth.
Nada.
Nothin’.
That’s a big fat less than zero (just to be clear).
Ok.
Let me continue the downer story for this 55%.
This group of households is scary to look at for a variety of reasons.
- They are truly struggling financially now.
- They are truly struggling emotionally now (let’s call this the “hope factor”)
- They are truly increasingly struggling financially (they are on the financial slippery slope and slipping at an increasing speed which means reversal is increasingly difficult)
- Their emotional future “hope factor” looks dismal thru their eyes.
Ok.
What is something that could help the have-nots get out of have-not land and get going toward the have land?
Education (because education and income is tightly intertwined).
Unfortunately the education situation in the United States is surprisingly bad. According to a report in USA Today (11/29/00) illiteracy is still a serious problem (despite the fact America is a highly developed country). Some factoids:
- One in five high school graduates cannot read his or her diploma.
- 85 percent of unwed mothers are illiterate.
- 70 percent of Americans arrested are illiterate.
- 21 million Americans cannot read.
- According to a child protection foundation, 71 percent of fourth graders are not at the education level they ought to be.
- The dropout rate among college students has risen to 37 percent
- College tuition has grown faster than the increase of middle class families’ income.
Statistics from the US Census Bureau show that the income of middle class families increased only 10 percent from 1989 to 1999, while the college tuition increased 51 percent during the same period.
The average college tuition in 1999 was 8,086 US dollars, accounting for 62 percent of the income of low-income families.
The average tuition fee of private colleges was 21,339 US dollars in 1999, up 34 percent over 1989 (while middle class family income only increased 10% over the same period), accounting for 162 percent of the income of poor families, but only making up for four percent of the income of rich families.
Here is the kicker conclusion to this point.
More than 30 million low-income families could not afford to send their children to community colleges (US Census Bureau).
(ouch)
The have-not affect (tighter family budgets) is also appearing in shopping behavior within this 55% of “lost ground. There has been a boom in budget-priced goods. Manufacturers are bundling items such as toilet paper and garbage bags in sizes that can sell for a dollar. And instead of going to Wal-Mart to find bargains, Americans are heading to dollar stores.
The budget mindset has gone to such levels that dollar stores are actually “stealing heavy shoppers” from Wal-Mart (according to one research firm … and I think it’s true). Visits to dollar stores increased 2.6% from June 2009 to June 2010 while during the same period visits to big box stores such as Wal-Mart declined 7%.
Look. 55% of any group changing their overall behavior (shopping or whatever) affects the economy and its components (stores, service providers, etc.)
Oh.
And this isn’t just poverty or lower income people. The 55% is made up of all income levels (below wealthy that, as noted in the first part of this write up, aren’t really changing any behavior). Keeping with the dollar store example. They are no longer just a shopping alternative for low income Americans. Some upper income people are also going to Family Dollar in search of bargains. And LOTS of middle income people are shopping at dollar stores.
In conclusion.
The term “have-not” is far reaching. And deep reaching. ‘Not having’ is going to have repercussions to this group of people to the extent it will affect future generations.
Hunger affects brain power.
Lack of education affects productivity and increases ignorance.
Ignorance leads to increased conflict.
The depth of the have-not is like dominos.
Once the first falls they start going. Oh. And the start going faster and faster because they are placed on a downward incline.
So.
That is my post on the have-nots.
Dismal, wasn’t it? (yes)
Let’s move on to my last chapter of this story.
recession impact the final chapter
Apr 26th
Ok. All of these recession impact articles I have been creating.
Part one focused on the haves.
Part two focused on the have nots.
Where does this all take us?
Part 3. My final chapter.
And just some musings on what this all means for the future (or possibilities).
First.
This huge increasing gap between haves and have-nots makes you begin thinking about wealth redistribution. I am NOT a wealth redistribution believer. But I am also a huge believer that when things are really out of whack you need to do something about it. Or maybe better said ‘perpetuate the change that needs to take place to enable it not being out of whack.’
(just one more reason I couldn’t work in government because they would never say something as simple as that)
Look.
This gap is an issue. Ok. Not an issue … a problem.
There was actually a recent American study (sampling young and old, men and women, rich and poor, liberal and conservative) to answer two questions.
They first were asked to estimate the current level of wealth inequality in the United States, and then they were asked about what they saw as an ideal level of wealth inequality.
Results:
- Americans drastically underestimated the current gap between the very rich and the poor.
The typical respondent believed that the top 20 percent of Americans owned 60 percent of the wealth, and the bottom 40 percent owned 10 percent. They knew, in other words, that wealth in the United States was not distributed equally, but were unaware of just how unequal that distribution was.
- Americans definition of desired state is significantly different than reality.
Respondents identified their ideal distribution of wealth as the top 20 percent to own just over 30 percent of the wealth, and the bottom 40 percent to own about 25 percent. They still wanted the rich to be richer than the poor, but they wanted the disparity to be much less extreme.
So why did I decide to include this additional factoid?
Well. Because misperceptions like this create social tension.
And social tension leads to inefficient society (at its least damaging). And leads to conflict (at its most damaging).
Tension? Yup. Not only is the gap very very real. But people underestimate the real gap (and are still unhappy). And they believe the real gap should be significantly different than the current truth.
So when reality becomes a common truth the proverbial shit is gonna hit the fan.
(because 55% of America is a shitload of people … some may even suggest it is a majority).
You can hear the rumblings even now.
I do know some things for sure.
A minority can make a difference in the way things are shaped.
A passionate majority WILL make a difference in the way things are shaped.
Am I suggesting an Egypt like revolt? Geez. I don’t think so. But. Hunger and “have envy” can create some true unruliness when it incorporates the masses (and not a minority).
With that said I will leave this particular musing on my part with a thought pulled directly from the May/June Foreign Affairs magazine:
“ … deteriorating ability to provide basic services and the government’s indifference to widespread unemployment and poverty alienated tens of millions of …”
Yes.
That is headline on page one of the new Foreign Affairs magazine. Is it about America? Nope. Its about Egypt. But quite scarily the phrase could certainly embody the America situation if we are not careful.
Ok.
Back to that wealth redistribution and recognizing things are out of whack and the fact we should (need) to do something about it.
Can I offer a real solution? Nope.
Well. (Maybe I have a point of view type thought solution)
I do believe we can learn from the past.
America pulled itself out of the 1920’s depression though a variety of actions but let me focus on internal infrastructure development.
Face it. FDR was a crafty guy. First. He recognized the idle hands do no mean idle minds so he kept people busy ‘doing things.’ Second. He realized if they were going to ‘do something’ it may as well benefit the entire USofA.
He made a boatload of people go ‘do’ building dams and bridges and roads and highways and … well … infrastructure type stuff.
The result?
A shitload of people were not idle.
A shitload of people were being productive.
And a shitload of things were created that reshaped that world and enabled the life we live these days. It kinda seems the perfect opportunity to do exactly the same thing now.
Build. Create. Do.
On a personal note (about what t actually ‘do’ in this case) … I will suggest that a hi-speed rail system is the most obvious infrastructure project America focus on.
And the costs & returns & usability analysis that are slowing it down are so crazy wrong that … well … its crazy. We are currently a car driven society. Of course all analysis would make hi speed rail look bad. True sweeping behavioral shifts are next to impossible to forecast.
That said.
Build the frickin’ hi speed rail.
Build living infrastructure to support it (cities and towns).
Drive gas prices up to European levels.
Build less cars.
And we will solve a shitload of problems.
Ok.
Back to the post.
Wealth redistribution probably isn’t the answer. But the problem needs to be resolved somehow.
Next.
Moral fiber of America.
Sound silly to bring up when discussing haves and have-nots and income gaps and crap like that? Shit. I don’t know. But it does seem like this whole thing is a test of our moral fiber.
Even a capitalistic society has to have some morals (it cannot just be about survival of the capitalistic fittest and all that stuff).
And can we truly sit back and watch that 55% have-not group slip lower & lower?
And watch them try to claw their way out of the hole they are in as the economy improves (recognizing it is next to impossible to get out of that hole within their lifetime)?
And watch 55% of America mired in despair when they should be invested in hope (because isn’t that what America is supposed to offer)?
I don’t know.
I think it would be tough to sleep at night if we didn’t do something. And I don’t mean token ‘somethings’ but real significant game changing ‘somethings.’
PewResearch called this “2 Americas.”
Hmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmmm.
I guess the real point of me writing so much on this and saying some of the things I said is …
aren’t we 1 America?
