The Voodoo [Economics] that You Do So Well

Everybody and their uncles seems to have a solution for the global economic crisis. There are literally as many roads to recovery as there are politicians. All of these roads have one thing in common, whether the road is a liberal solution or a conservative one. They all are too simplistic.

A case in point: Fred Thompson, a Republican Presidential-wannabe, who appears to be gearing up for a run at the nomination in 2012 already, offers his solution in a very interesting sound bite here. But that is all it really is. Just a good media piece, bot a real plan for recovery,although he does make one very good point.

Thompson says that the problem is that this country, both the administration and the populace as a whole, has been living high on the hog using borrowed money and we have been doing that for quite some time. I certainly agree with that. 100 per cent.

Thompson goes on to say that the liberal solution to the economic crisis is more spending of money we don’t have. He says the purpose of any proposed economic stimulus package is to encourage us to spend, spend, spend. The implication here is that this spending will be more or less on frivolities – more conspicuous consumption. That may be true if you are in the same economic bracket as Fred, but for most working class Americans, those stimulus checks will help get the mortgage caught yup, pay the utility bills, buy new clothes or the kids, or, if we have been lucky, allow us to save some of it for an emergency – if there is anything more of an emergency than our present economic situation.

Contrary to Thompson’s simplistic analysis, money will have to be spent to create new jobs, and not just the hole-digging and hole-filling ones Thompson talks about. If need be, we should revive the WPA, the federal agency that put people back to work during the Great Depression.There are a lot of roads, bridges, public buildings, national parks, etc. that need repair and/or replacement. The point that Thompson misses is that people cannot save or spend if they have no regular paychecks.

Thompson touches very briefly on the mismanagement rampant in corporate America, the mismanagement that we, the American taxpayers are now footing the bill for with the financial markets bailout and the pending auto makers bailout. The root cause of this mismanagement is not the incompetence of these corporate executives, although that is a significant factor, but rather the rampant greed and conspicuous consumerism that is endemic in American culture. That, coupled with the planned obsolescence that is inherent in almost every American-made product you buy,everything from the cars built by the Big Three to Microsoft’s software.

We, the American consumer, are sold products that have a life span of, maybe, five years. A five-year old Ford or Chevy is ready for the scrap heap and replacement, unless you want to have it in the shop for a complete overhaul. Unlike the Japanese and European car makes, we do not build cars that last for ten years or more. There’s no profit in that. And no profits means unhappy investors. And unhappy investors means the directors and executives get the ax. And since it is the directors and the executives who make the decisions, they will make decisions that will guarantee they keep their jobs.

Instead of focusing on planned obsolescence to make profits, the car makers, to continue with our example, need to focus on building better and more efficient cars, cars that will make people want to replace their old one, not have to replace it because they have to. That would lead to profits. maybe not as high as the current system, but profits nonetheless.

It is the emphasis on profits, obscene profits in some cases, that is the root of our economic crisis. Corporate America has become obsessed with profits above all else. We used to pride ourselves on the quality of American products.Not any more. In fact, most American products are not even made in America anymore. They may be assembled in America, but the parts come from somewhere else. And the reason for that is these parts are cheaper than American-made parts. Cheaper parts means more profits to satisfy investors.

The original purpose for the investment industry was to provide working capital for manufacturing, to develop new and better products, to provide more jobs. Now, this investment capital is used to provide insane corporate salaries, ridiculous executive bonuses and perks, and to line the pockets of investment bankers. Millions and millions of people have turned to investing in the stock markets as a way to build wealth for themselves. But the only ones who will get rich and stay rich, as the current economy makes very clear, are the corporate fat cats.

No, Fred, saving is not the answer,not the whole answer. A shift in focus in America from conspicuous consumerism and the spending money we don’t have that accompanies it, is a good start. but, until we put some serious limits on things like corporate executive compensation, tighten credit, and, most importantly, put some serious curbs on speculation in the financial markets, this economic crisis will only continue, not recover. Unless the American people are willing to make and demand some fundamental changes in our economic policies, we will have to put up with all the voodoo economics of politicians like Fred Thompson and all the rest of the political witch doctors.

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