Post-war recessions have averaged 11 months. Why is this one taking so much longer?
\nBecause this is no recession. We\u2019re treating the wrong disease.
\nIn 1990, in my book Penturbia, I predicted that depression\u2014not recession\u2014would likely strike at some time during 1990-2017. It happened. Unemployment has already risen for over three years and remains stuck at more than 9 percent.
\nMy theory of prosperity and depression is based on a fundamental correction to standard economics: Economics assumes that individual decision-makers do not influence each other. Of course they do. People interact through a multitude of channels such as movies, plays, lectures, radio, TV, advertising, political campaigns, emails, web-sites and personal contacts.
\nVia those many channels, \u2018We the People\u2019 periodically become dissatisfied with the current mode of life and come to an agreement on how we want to reorganize our lives and the economy. We shift the paradigm by which we live, thus creating a new society.
\nEvery new society commands a specialized economy able to satisfy its unique demands. The two together make up a \u201csocio-economy.\u201d
\nSince 1790, five successive socio-economies have emerged in the United States, each pushing its special objectives to an extreme. Each time, resulting excesses eventually give rise to a completely different socio-economy. In two centuries, America shifted from aristocracy to small-scale Jeffersonian democracy, to vast industrial expansion, which was, in turn, replaced by consumer dominance. In the 21st century, consumer dominance is surrendering to what we call \u2018Responsible Capitalism.\u2019
\nDepressions are caused by the extremely high uncertainties accompanying the shift from one socio-economy to another. Recessions are merely brief economic squalls. .
\nDepressions are deeply rooted. Consider the Great Depression.
\nAround 1845, impelled by their \u201cmanifest destiny,\u201d our predecessors began to abandon Jeffersonian ambitions favoring small farms and businesses and began to dream of building the world\u2019s most powerful industrial Colossus.
\nWorking for pitifully small wages six 10-hour days a week, our ancestors built railroads, commercial farms, mines and industrial cities. They worked, pinched pennies, saved, invested and succeeded. From 1840 to 1900 Chicago\u2019s population leaped from 4,500 to 1.7 million!
\nAfter 1900, the construction of still more railroads and still more industrial cities was reaching a limit. Overproduction some warned. Marxists confidently predicted the end of capitalism. Americans merely shifted to a new variety of capitalism.
\nIn ensuing decades, the countervailing Consumer Socio-economy slowly and painfully crawled into existence. Americans attempted to transform themselves into little kings, masters of their own tiny empires in suburbia. However, they couldn\u2019t learn to consume fast enough to forestall the inevitable catastrophe, which erupted in 1929.
\nUnfortunately, like today\u2019s Chinese, those great grandparents of ours were hopelessly addicted to saving. They couldn\u2019t and wouldn\u2019t spend enough. Besides, we were hopelessly unprepared. We lacked an abundance of cars, highways, suburbs and an airlines industry to create easy access to California, future capital of suburbia. We lacked tempting new suburban houses, TV, television advertising, consumer credit and credit cards. And we lacked affiliations with labor unions, a necessity for higher wages.
\nLittle by little we learned our roles as consumers. Depression turned into prosperity. By the 1960s, the consumer-minded Little King was in high gear.
\nBeginning with Rachel Carson\u2019s Silent Spring, the 1960s also saw the birth of modern-day environmentalism, core of the fifth and latest socio-economy, enemy of the Little King. Call it Responsible Capitalism. We\u2019re increasingly celebrating the nobility of spirit that gives more than it takes. Bill Gates and Warren Buffett are leading millionaires and billionaires to give away large portions of their wealth.
\nWe worry about climate warming and volunteers stream to New Orleans, Asia, Haiti and Pakistan. Although Responsible Capitalism will eventually dominate America, the socio-economic conflict it is creating with America\u2019s long-established consumer economy is creating a depression.
\nThe current depression is precipitated by the uncertainties of the succession from the Little King to Responsible Capitalism and by mounting opposition to the Little King\u2019s excesses, its increasing debts, deficits and careless violations of our planet. By 2020, the Little King will be as dead as the Roman Empire.
\nWe don\u2019t yet know enough about the jobs to be created. To cure today\u2019s depression I propose a federally funded task force.
\nFirst, it should engage the American public to elaborate the meaning of Responsible Capitalism\u2014the new way of life, the likely occupations, cities, regions, houses, families, professions, medicines and products. We should award contracts and prizes for winning ideas.
\nSecond, ideas and proposals should be invited on how best to eliminate the unsustainable and eventually unwanted Little King.
\nThe effort to deliberately fashion our own socio-economic future will mark a crucial stage in the evolution of mankind. We\u2019ll specify how we would prefer to live and work in the decades ahead. And we\u2019ll speed creation of the 9,000,000 needed new jobs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Post-war recessions have averaged 11 months. Why is this one taking so much longer?
\nBecause this is no recession. We\u2019re treating the wrong disease. <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"categories":[8,5],"tags":[12,11,13],"_links":{"self":[{"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=\/wp\/v2\/posts\/295"}],"collection":[{"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=295"}],"version-history":[{"count":1,"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=\/wp\/v2\/posts\/295\/revisions"}],"predecessor-version":[{"id":296,"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=\/wp\/v2\/posts\/295\/revisions\/296"}],"wp:attachment":[{"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=295"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=295"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.socio-economics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=295"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}