Why So Glum?
The Economy Needs a Bloody Mary, Not Chemo
The news is, admittedly, suboptimal: All signs are pointing to a recession, but these things happen. The greater danger is that some 80% of Americans think that the fabled wave of the American Dream has broken against the rock and that our 1.2 children will have it worse than we currently do, which is presumably pretty damned awful. All of which begs the question: Are things really that bad? Or more to the point, why so glum?
A closer look at the numbers show a different picture. In 1990 when the US was about to stand alone as the last remaining superpower, we were responsible for about 25% of the global output – at the risk of chapping both the Make America Great Again and the Build Back Better Set, that number hasn’t changed much since then. This isn’t a stagnation, though.
The world, however, has changed. Despite cornering the shower flip-flop market, in 1990 China accounted for a scant 1.6% of global output, today it is 18.5%. That’s impressive, but they didn’t take share from the United States. Just whose share of global output they ate up can be seen in another stat: In 1990, the US was responsible for 40% of the output of the G7 nations, today it accounts for 58%. Adjusted for purchasing power, an American long-haul trucker makes more a Portuguese doctor, the average income, the average income in Mississippi is better than the average in France. Speaking of Mississippi, the poorest American’s income in real terms has gone up 74% since 1990. Granted, we spend a hell of a lot more on healthcare but due to market forces, our healthcare is also a lot better than the rest of the world.
So why the long face? Well, we are looking at a recession and, like hangovers, those are a) never fun and b) when you are staring down the barrel of one, you do tend to think that you’re dying. Money has been so cheap for so long, we seem to have forgotten that those ultra low rates weren’t normal. In short, money has gotten expensive, and so it everything else. Middle class wages are rising, but not as fast as that of the top tier, or the bottom for that matter. And while it’s been nearly 20 years since I’ve had an honest job, the percentage of prime aged men out of the work force is higher than in the UK, Germany or even France – a culture that takes both trauma and ambition laying down.
“The whole point of practical politics is to keep the populace alarmed (and clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.”
A recession, though, is not the same as a financial crisis or terminal decline. Like a hangover, assuming that you didn’t leave the tab open all night, or book a last-minute flight to Bangkok, there is no real lasting harm. The real danger for the economy is that enough voting Americans are so convinced that the economic system is broken that we ask those theatrical spazzes in Washington to fix “the problem.” And they will jump at the opportunity. The hobgoblin of the economy seems to be the one thing that Washington can agree on, although they can’t agree on just how, precisely, everything is awful.
True, by one critical metric the US is no longer the largest economy in the world, but we’re are still the richest and most dynamic, even if we’re spendthrifts. Government subsidies will direct money to neglected sectors in the short term, but it will also hamstring performance, stifle private investment and dampen innovation. To beat the metaphor to death, the government will use chemo to cure a hangover, when, if you are fundamentally healthy, all you need is a bloody mary and time.