Economy sinks as we save bankers
To review the point that I made in Chapter 7 of my book “Greenspan’s Bubbles” and in many columns: In the past expansion, economic growth was almost entirely about real estate. Gross-domestic-product growth, excluding mortgage-equity extraction, was almost nonexistent. In addition, when you consider that 30% to 40% of all jobs were real-estate-oriented, it’s clear how hollow the economy is liable to be going forward.
Emphasis added by me.
Is there anyone out there reading this who can confirm that statistic?
This is perhaps the most important statistic I’ve ever seen cited.
It explains a lot and ties into the next post I’ll be doing.
I need to give some background here.
One phrase I have heard over and over again in relation to various scenarios is this: Progress is automatic.
It’s been used to describe the future as depicted by the 1939 World’s Fair.
It’s been used to describe various aspects of Darwinistic beliefs.
It’s been used as the cornerstone of some beliefs in America.
It has, in fact, been the foundation of advocates of pure reason.
But progress is not automatic.
Human history testifies to the fact that civilizations deemed advanced have collapsed. Jared Diamond’s book, Collapse: How Societies Choose to Fail or Succeed, explores the factors that have wiped out past human societies.
The financial crisis we are facing — and are still heading towards — is one of those things that has a high probability of bringing on such a societal collapse.
However, that collapse does not have its roots in this recent round of financial rapacity and outright fraud. The seed for the true roots were planted with a noxious idea called deindustrialization. The wikipedia entry does not do the term justice (nor does the entry cite the seminal book on the topic!).
Deindustrialization falls under the foolish notion of “progress is automatic.”
That is, as a population becomes materially better off, it will also aspire to better jobs. Thus, at some point in the future, the population will become too educated to sustain a manufacturing base. Manufacturing is seen as labor “unworthy” of the educated.
There are several fallacies to that line of thinking. The most dangerous one is that it posits all of a nation’s citizens advancing educationally at the same rate.
We only have to look around to see that’s not true.
An additional error in that wikipedia entry is this:
Total industrial employment has been roughly constant at around 30 million people since the late 1970s (though there has been a steady decline since the all-time peak of 31.5 million in 2000).
Wait a minute. What about industrial employment before 1970?
Before 1970, this nation made its own televisions, radios, and more. Look at the back of any electronic device today and you’ll find Made in China. (The same thing for toys … and much, much more.) When it comes to employment, this is where economics devolves into “winners and losers.”
Free trade fundamentalists will argue that cheaper goods are beneficial to a nation. They ignore the fact that the cost of these goods comes at the expense of a nation’s workers losing their jobs — and of potential future employees not having a job waiting for them.
Of what benefit are cheaper goods if the nation’s population can’t afford to buy them?
A devastating ongoing consequence of deindustrialization is a growing population of the discontented and discouraged. Facing a bleak future, their allegiance to the society as a whole is weakened and can ultimately descend into a dark mirror image of the sociopathology at the top of the society — a sociopathology based not on the “luxury” of monetary greed, but based on the overwhelming need to merely survive.
There are two factors today that disguise just how bad things actually are in America:
1) Safety net disbursals by governments (which still don’t prevent a persistent homeless population)
2) The shadow economy based on illegal drugs (which manifests itself in others ways; one being predation upon others)
If those monies — and “opportunities” — were subtracted from the American economy, what would be left as its primary engine of growth?
Would it be what the statistic above cites — real estate?
If that’s true, then indeed, “Now we’re sitting on the biggest bomb man’s ever made.”
And the true dimensions of this bomb have suddenly become greater than all past estimates.
See the next post for just how big.