Ok, so here's my rant for the week. Stop calling people 'consumers', and stop blaming 'consumers' for the crappy economy. ("Consumer Spending Down".) We are just people, and it is not the typical American's fault that the economy somewhere in our past became tied to how much we spend. Stop telling us it is our own fault that our personal budgets are in such dire shape, with huge credit card debt and no savings, and then tell us it is our fault the economy is in the dumper because we aren't shopping. Really. Stop it.
Last week, I saw a piece that said that something like half of the people in the United States would be unable to pay their bills within two weeks of losing a job because they don't have enough in savings, and of those, a quarter are living paycheck to paycheck. Well, duh! Didn't we all already know this? Don't we live this everyday? Yeah, Americans have no savings. There is a straightforward reason for this. We aren't merely not taught how to save. We are taught not to save – we are 'consumers', and are taught to spend. So, we spend.
(I find it ironic that we have to pay someone - a personal finance adviser - to teach us how to not spend.)
Of course, there is also that whole thing about how the rich are getting richer, and the poor are getting poorer. Today the poor includes the majority of Americans. So more and more people don't actually make enough to save some of it – unless we stop eating, or driving (ha!) or live in a box under the freeway. The cost of housing and food are going up, and wages are going down. Sounds self explanatory why the economy is in the dumper. We don't shop if we don't have money, and we don't have money if we get paid crappy wages in an economy where basic necessities cost a fortune. (Are you thinking to yourself, well, Karin, what about that whole banking scandal, and the stock market plummeting...Don't you think that might have something to do with it? Well, I'll get to that in a later rant. Or write it yourself.)
All this whining about how lending has stopped, and the government needs to do something to get it going again baffles me. Isn't it good that we now are forced to live within our means? Shouldn't we be taking this opportunity to change our wicked ways?
This is what I have noticed. Our esteemed government has noticed our troubling situation, and has started taking steps to get the country back on its feet economically. But no one seems to have noticed the pink elephant in the room, which is called 'an economy based on consumer spending'. Congress bickers endlessly about how much stimulus should go to banks and car manufacturers, and how much has to go to infrastructure projects, because they define the problem as companies being in the tanker, not as people struggling to get by or losing their jobs. It doesn't seem to occur to those pouring money into GM that no matter how much money we give them, you can't force us to buy their crappy cars – especially if we don't make enough to afford one. Or, for that matter, if we become fiscally prudent, and decide our current car suits us just fine. And that they are a manufacturer, not a government entity – we don't actually have to save them. They can go under, just like any other company. Oh, sure, I hear the arguments that they are just too big to fail, like the banks, and that if we don't save them all those people would be out of work. Well, I am beginning to detect a whiff of Communism in that argument. Keeping people employed, just to keep them working, smacks of 'guaranteed employment', which is straight out of Chinese New-Leftism. (Not to say I am against communism, but I suppose Chinese Communism is another story. However, this is a discussion for another time.)
You might say, Karin, isn't arguing that people out of work is the problem and then complaining that we are sinking tons of money into a failing car company to keep people employed a bit hypocritical? I can see how that conclusion might occur. But I am not saying those people who work for GM or the companies that supply GM, shouldn't work. I'm saying we shouldn't shore up a failing company, just to keep them working.(And by the way, those companies that supply GM should have seen the writing on the wall years ago and diversified. Seems to me it is their own stupid management that put them into this position, just like GM.) All these people can get other jobs, just like every other person who works for a company that goes under.
Once we realize this, the problem becomes what to do about all these people without jobs, in an economy that is shedding jobs like a winter coat. This is exactly where the government should be stepping in!!! Forget GM, let it fail. Instead, shovel all that money into creating the opportunity for jobs in the parts of the economy that aren't reliant on consumer spending. This will help us all. My preference is green building, infrastructure, renewable energy and public transit. These vital and necessary areas, and I am sure there are lots of others, need an infusion of 'free' cash to get off the ground in a consumer-based, capitalist economy that will only shovel money to the places that are known entities, and that the shovelers think have a good chance of high returns. There is no track record for some of the stuff we need to focus on, like green building, and for other stuff, like fixing infrastructure and transit, there are no monetary returns on investments, so the capitalist economy doesn't want to fund it. Well, it needs doing, our vaunted capitalism won't do it, and it will create zillions of jobs, so it seems to me it is the government's duty to fund it.
Where does that leave us? The next argument might be, all these people are out of work now, how long is it going to be before all these zillions of jobs in my dream scenario are available? That is the other place the government needs to step in. They have to fill in the holes. Job training, better unemployment benefits, and useful job placement programs – these are the other half of the solution. You can't just chuck all these people on the street, without some help from the government. Call it socialism if you will (which I don't consider a bad thing, by the way) but it is the government's duty to take care of its citizens, else what is it there for? And I don't think it needs to take very long for stuff to start happening, either. The recent stimulus given to states was implemented pretty darn fast, and is expected to be spent in 90 days, or they are taking it back. So the federal government can work quickly when it wants to. It just needs some encouragement.
Stop buying GM cars. There's a start. And start socking money away in a savings account. There's another step. Demand government investment in new bridges, high speed rail, fully funded decent public transit for everyone, and renewable energy. Hmm, what else? Protests, anyone?
21 comments:
This is john posting on kathleen's phone.
Interesting piece. I must admit that by the time I got to the third sentaance I said aloud, "shes wrong." the typical American Shares a large portion of the blame for the state of the economy. The other portion is owned by a financial services industry that took advantage of a deregulated environt like junkies at a coke plant.
It disturbs me to hear you say things like "wall those gl workers can just get another job." let me ask you, if it is so easy to find a good paying job then why do you still work at powells?
I have more to sAy and will post later.
First, my comment to the post-
Amen, sister! There was an episode of This American Life recently that was basically 'Banking Crisis for Dummies' (called Bad Bank, if anyone wants to listen to it), in which one of the experts provided the frightening fact that currently, consumer debt in this country is %100 of gdp- meaning as a society, we owe %100 as much as we make. Can anyone guess the last time that happened?
/dramatic pause
That's right- 1929. One of the experts they had on said, in fact, that everyone who is complaining that the banks are not loaning out the tarp money as intended are wrong. What we do NOT need is to take out more loans. As you say, Karin, what we need to do as a country is to start living within our means. However- I do think that as John says, this does mean that the American people share a portion of the blame for the mess we are in. Yes, our capitalist society is consumer driven, and we are encouraged to over-spend at every turn. But just because they tell us to buy stuff we can't afford doesn't mean we have to.
Now my comment on the comment-
John, I think her point is not that GM workers can easily find another job. Rather, it's that if the government is going to get into the business of ensuring jobs for it's people (and she does assert it should be in that business), they should do it in a way that provides jobs that have more long-term and wide ranging benefits. If we just prop up a failing manufacturing job that relies on consumerism and corporate responsibility to succeed, we will shortly be again in the same position we are now. Let GM fail, and then take the money we would have used to rescue it and put it into infrastructure projects, giving people jobs building transit systems, fixing bridges, developing green energy alternatives, etc. Or put the money into education, and make it easier for factory workers to go back to school. Stuff like that.
And I look forward to both of your promised follow-up posts...
I just listened to the NPR show you mentioned. Now normally NPR has a left-leaning slant towards things and, while I agree with much of what they say about many things, I believe it is critical to hear both sides of any argument before composing an opinion. I would argue that for every hour you listen to NPR, you should spend an hour listening to Rush Limbaugh. For every piece you read blaming Wall Street for capitalizing their gains on the backs of American "workers," watch a show on CNBC. Only that way can you possibly understand the situation we are in now, how we got here, and what the fix is. Because the truth isn't being told by NPR. Nor is it being told by Fox news. It is somewhere in the middle.
That said, the NPR piece was a good one. A little soft on the technicals, and they did not go in to mortgage derivitaves at all, which is probably the bullet that killed the sick horse in this case and must be understood. But I understand the general audience doesn't get that kind of thing, and even if they did they probably won't see the connection between a credit default swap and the price of bread.
So for the other side of the story, please watch this Frontline:
http://www.pbs.org/wgbh/pages/frontline/meltdown/
Ok, so I watched the Frontline episode, and of course it was very good. Though I am not sure how it is the "other" side of the story, so much as a more technical explanation of the same side. I came away from it with a little better understanding of the details of how we got here, and admittedly with a little more respect for Paulsen, but still with the same opinion of things as I have now.
But I agree that it is important to get as much information from all sides as possible, and I always have watched and listened to conservative media (though not exactly at an hour for hour exchange rate.) I do admit I have never watched CNBC, but not because its conservative. Only because its fucking boring ;)
Also, I would point out that PBS is as much a left leaning news outlet as NPR is.
That said (as you said) I will assert that my point (and I think part of Karin's point as well) is actually a fiscally conservative one. In fact, I even commented to Rick the irony of my coming to this conclusion after hearing the story on liberal radio. Its not just the evil banks and securities firms who caused the problem (though they are evil). I am concuring that Main Street shares as much of the blame as Wall Street. What we all are guilty of is succumbing to greed. Greedy homeowners took out loans they knew they couldn't afford from greedy banks who gave them the loans knowing they couldn't afford them because they could sell those loans to greedy investment companies who knew the loans were shady but sold them back and forth to each other for quick profits anyway. Like a game of hot potato, one guy said on the Frontline episode, except everyone ended up with a potato.
Where I remain true to my leftist principles is in asserting that the whole system is bad. Capitalism itself is based on greed. Wall Street doubly so. But I'm not even trying to make some kind of grand 'Capitalism vs Communism' ideological point. (Thats a topic for another post). This is just about common sense and personal responsibility. We spend too much money; we think we need too much money; we are willing to be conned, willing to believe things we know can't be true, willing to con others into things we know are wrong, just to make more and more money. And our financial and consumer systems are designed to enable and encourage those tendancies.
So rather than trying to prop up this system and trying to make it work again, just so we can all end up in this same mess in another few decades- what we should be doing is getting ourselves out of it all together. We need some whole other kind of system.
Now, admittedly, I don't have the faintest idea how to do that. I totally get that the entire global financial system is on the brink of collapse, and something has to be done. But I cannot get past the conclusion that just trying to repair and restart the same system that inherently caused the problem in the first place is kind of like staving off starvation by eating your own shit. It may work for a little while, but without changing the reasons why you are starving in the first place, you will soon run out of even shit to eat.
First, I gotta say, it is so interesting to see the differences of opinion about my opinion piece. Ah, the pleasures of a good argument!
So, on to my rebuttal. I don't claim to know where I fall in the conservative/liberal/leftist spectrum, I just call it like I see it. My opinions come to me based on my experiences, and what I see and read. Our culture and our economy has become based on shopping and greed. 'Consumers', the half of that scenario that this post is about, is the shopping part. The greed part is where the wall street traders and banking in general fall. I haven't yet watched or listened to the two suggestions you offer, so I can't comment on them, yet. Don't worry, I am sure I will...
Suggesting that a liberal listen to Rush Limbaugh is ridiculous, because he is not in the least an accurate example of the 'right'. Suggesting that people watch CNBC also reveals a bias - CNBC is a cable channel, and you assume that everyone can afford cable. I do not get that station - to expensive. I read the paper - the Oregonian (which is not particularly unbiased, but also not all that left-leaning, believe it or not) and the New York Times. I also watch the NewsHour and Washington Week. This is where I get most of my news. Maybe not righty tighty, but I figure is is as unbiased as I can get.
Now, John says he determined by my third sentence that he disagreed with me. That sentence says that regular people are not to blame for our economy becoming reliant on consumer spending. Do you disagree with that statement? If so, why? I am not saying that consumer spending is not a problem, I am saying it is a problem for the wrong reasons.
The 'financial services industry' as we so casually call it, is another elephant in the room. Why does such a disreputable, dangerous, and disastrous situation exist? I could create a whole post about how much evil I think it is, but this one is about consumer spending, so I will say that it encouraged overspending, both by us, consumers, and by themselves. House mortgages, credit cards, loans, all sorts of things rich people invest in to make a quick buck that I know nothing about, all of it encourages living beyond our means, and that is the problem. Greed. And consumerism. Two peas in a pod.
Two more quick comments, before I go off and listen and watch stuff. First, what does my working for Powells have to do with this? I make a decent living, thanks to the union (and I tried working within the system and now my 401K is in the crapper, thanks to you wall street types), and I have begun to learn to live within my Frugal means (I have no credit card, and have no intention of getting one). Jen knows how I feel about mortgages - a total scam, for the lendee. I did not for a moment suggest that getting a new 'better' job is easy, in the current economy. Just the opposite. It is near impossible, which is why I feel that the government has the responsibility to generate a situation where new, reliable, decent paying jobs are created. Throwing good money (tax payers money)after bad (gm's debt) is not helpful. Might as well flush it down the drain. Temporarily propping up a failing business is not the solution. Creating a climate where jobs are generated is.
"That sentence says that regular people are not to blame for our economy becoming reliant on consumer spending. Do you disagree with that statement?"
Yeah, I do disagree with that statement. Just because someone offers you a million-dollar mortgage does not mean it it *their* fault when you foreclose. If the mortgage was beyond your means from the beginning, Its your damned fault. And just because someone says you should buy clothes, cars, toys and shit you don't need doesn't mean it's not your fault you run out of cash when you do buy those things.
"I tried working within the system and now my 401K is in the crapper, thanks to you wall street types"
I didn't leverage my company's equity with mortgage-backed securities, so don't hate on me. And you are still young, there's no reason for you to even be looking at your 401(k). And if you took money out because of the market, then you hurt the economy even more by jumping on the fear bandwagon.
"how I feel about mortgages - a total scam, for the lendee."
Mortgages are not in themselves a scam. Some types of mortgages like 3-year AMRs are a bad vehicle for most people but more profitable for the lending institution, and people get suckered in to buying something they shouldn't. Yeah, the bank should not be selling an ARM to someone who will get killed by it, but at the same time who are these stupid people that buy ARMs before understanding them? People need to learn to think for themselves.
But mortgages are "good debt," because as you pay off the debt, the property goes up in real value. (Don't counter that the housing bubble is evidence that there is no "good debt." That's like saying it was warm today so global warming doesn't exist.)
Car loans are "bad debt" because as you pay off the loan, the car goes down in value. Getting a mortgage and buying a house is better than living in an apartment because by buying the house you let your money work for you -- your investment goes up in value. By paying rent you're just throwing money away, with absolutely nothing to show for it at the end of the month except another payment due.
"So rather than trying to prop up this system and trying to make it work again, just so we can all end up in this same mess in another few decades- what we should be doing is getting ourselves out of it all together. We need some whole other kind of system."
I, again, disagree. This system does work. It has its flaws. Some are pretty major. One of it's systemic flaws is the fact that it is impossible to have a capitalist system without having some amount of poverty. But there is no better alternative either in practice or in theory. Communism can't work in practice because people are lazy and will press their advantage. If the least a person has to do to thrive and be happy is just go back to the pile, then that is all they will ever do. Nobody will ever add to the pile unless everybody has to get by on their own efforts. That is why capitalism works and communism doesn't. It makes everyone get around under their own power.
One of the unfortunate aspects of capitalism is that it is cyclical. The cycles tend to last about 30 years, because that is how long people's memories last. The highs can be pretty high where it seems like everyone gets rich. But the lows can be catastrophically low, where it seems everyone is homeless and without a job. We weather those storms and move on, while people in your communist utopia live under a boot for their entire lives.
OK, I'm done ranting. :):)
For now...
Read the statement again. I am not debating whether individuals are at fault or not for choosing to get mortgages that are more than they can afford. It is more abstract. Consumer spending has risen to around 70% of the GDP for the US, much higher than other 'mature' countries (1st world is no longer fashionable...). This means, instead of our country spending its money on building stuff, or repairing roads, or starting up companies, we are shopping. A lot. We are frittering it away on cars and mortgages and clothes and big screen tvs and ipods. And on interest, because we are so in debt. When we stop shopping, our economy plummets. Oops.
As for the mumbo jumbo about mortgages, and loans. Blech. Good debt, bad debt. All that stuff seems pretty faulty, when you look at the current housing crisis. Assuming that your house will be worth more when you sell it, and therefore spending tons more on interest seems pretty stupid, in my opinion. What goes up, must come down. Buy a house to live in it, not to make money.
Spending money on interest seems more stupid than spending money on rent? That doesn't make any sense.
Yes, of course you buy a house to live in. But with a mortgage when you move out of the house you get some of that money back. If you were lucky you might even get more back than when you moved in. But in an apartment all you get is nothing.
Wow- this is a good debate! :)I wonder if there is a limit on how many comments can be posted to one blog? Guess we'll find out...
Ok, first to Karin:
You had me, but then you lost me. I think you are perhaps seeing this through a bit of a hyperbolic eye (Yes , I made that up) and are making some generalizations that hurt some of your points.
"House mortgages, credit cards, loans, all sorts of things rich people invest in to make a quick buck that I know nothing about, all of it encourages living beyond our means"
First, it is not true that house mortgages "encourage" people to live beyond thier means. There is nothing inherent in the mortgage itself, or in the owning of a house, that makes people somehow greedier than they were before. (In fact, often one's mortgage payment ends up being the same or less than the rent payment was.)Yes, there are many people who bought houses that were more than they could afford, but there is no causal connection between that and mortgages per se. Any connection is merely a proximal one. It was just plain human greed, which could just as easily have been aimed towards a car, or a pair of shoes. This is an important fact, because by blaming things like mortgages, you are diverting the blame from where it belongs. It is not the mortgage's fault people are greedy. People just are greedy.
Second, you are comparing apples and oranges. Like I said house mortgages, and for that matter investments, do not encourage people to live beyond their means. They are simply tools people use to get money, so that the things they want will be within their means. But I agree that credit cards and some other types of loans do encourage people to live beyond their means. However, it is important to make the distinction between these two phenomena because in order to find solutions to the problems we have, it is important to understand the causes. Lumping unrelated issues into one grand "evilness" to yell at might make you feel better, but it will not help to understand how we got here, or how the hell we get out.
Another example:
"...instead of our country spending its money on building stuff, or repairing roads, or starting up companies, we are shopping. A lot. We are frittering it away on cars and mortgages and clothes and big screen tvs and ipods."
Ok, this doesn't make sense- if we buy a car or an ipod or a house, doesn't that mean we are also making cars and ipods and houses? And doesn't it mean there are people with companies who sell cars and ipods and houses? You cant really say we should be making and building if you don't also allow for the fact that there has sto be stuff as a result of this making and building. And some of it will be stuff to buy. We can't just build only mass transit systems.
Final example:
"Greed. And consumerism. Two peas in a pod."
In general, what you are doing is conflating greed and consumerism. Greed is simply a human emotion. It is neither the product of, nor the exclusive purview of consumerism. It is just a part of human nature, one that mainfests in may ways- only one of which is consumerism. If I steal the covers from Rick in the middle of the night, that's greed. If I hog the couch, thats greed. If I take the last ice cream sammich, and don't offer to share it, thats greed. Again, if we are trying to find a solution, it is vitally important to correctly identify the problems. When you equate consumerism and greed, or insist that consumerism causes greed, you make it sound like the simple solution is to just take away consumerism. No consumerism, no greed. The world is at peace.
And I know you know that's not true.
Ok, now John:
I tried not to get into this, but you insisted ;)
"One of it's systemic flaws is the fact that it is impossible to have a capitalist system without having some amount of poverty."
The way I see it that's not just a systemic flaw, it's a fatal one. I cannot accept the fact that this is the best we can do- sacrafice some of the people so the rest can thrive. I am not a utilitarian, but I don't think even JS Mill would buy that. (For proof, I would refer you to his arguments before English Parliament against capital punishment, where he said that the posibility that a few innocent people might be sacrificed made any greater good that could be derived from it unjustifiable. But I digress...)
There is a better alternative in theory, and that alternative is communism.
I absolutely admit it has not worked in practice yet. But it has only been tried within the framework of some sort of Marxist program- and that is where the flaws have been. Remember- communism itself is *just* an economic theory. There is no necessary or inherent political system tied to it. In fact, it is the original economic system. Communal societies, where everyone did what needed to be done, and everyone got what they needed as a result, have exsisted for as long as there have been two people trying to survive in the world. And they still exisit today in many aborigional societies. So it can work; it has worked.
But the world has changed, and those sorts of small, isolated, agrarian communities obviously wouldn't translate well, I admit. This does not mean, though, that there could never be some form of communism that would work. You are a scientist-type. You must acknowlege that if a theory is sound, there has to be a way to make it a reality.
"But"- I hear you say- "the theory is not sound." I know- you raised the specter of totalitarianism that everyone imagines when thinking of communism. However, the "boot" of which you speak is a Marxist boot, not a communist boot, and Marxism is but one of any number of socioeconomic systems that incorporate communism. I am not talking about Marxism.
Again, communism existed waaay before Marx and Engels. They were just trying to find a way to implement it. Marxism is a program, a blueprint for converting a capitalist society into a communist one. And they happened to think that the only way to do that would be to *temporarily* give compete political control to a few. It is important to remember that they never meant for totalitarianism to be the final form of government. They viewed it as just a necessary step along the way. But again, I digress...
I maintain there is no inherent socioeconomic reason why there could not be a communist democracy.
And as far as the "lazy and greedy" arguments are concerned- first, I would reiterate that those are human qualities that exist regardless of, and independent of, any socioeconomic system. No matter what we do, people will always be lazy and greedy to some extent. Capitalism does not negate that any more than it creates it. It simply works around it. In this case, by providing incentive in the form of "capital", ie money. But the earliest communal systems, and even the ones existing today have found ways to work around it as well. In these systems, the incentive is survival itself. An understanding and acceptance of the fact that the individual can only survive within the community (which is true in capitalist societies as well). So if the individual is to survive, the community must survive. They do what needs to be done, because they understand that doing so will keep them alive.
Ok, I've said more than I meant to already... for further arguments on capitalism vs communism, either write your own post, or come over and buy me a beer ;)
CAPITALISM IS FOR PUNKS!
Alright you two....
Back in your corners!
In honor of this thread, I have updated my avatar.
Share and enjoy!
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