Maybe stalemate is the better term. How do you get a situation in which hours worked are increasing, real wages are declining, and business productivity is dropping? Perhaps it’s a bit late to worry about how we got there, because that’s where the US is now. The Wall Street Journal reported today that the US has the longest decline in productivity since 1979. The other two pieces were already in place.
It’s the chicken and the egg thing again.
- Business leaders won’t invest in growth until they see a real potential for increased sales. Businesses will also try to hold the line on salary expense by continuing to offshore jobs and use cheap H1-B workers.
- Consumers are squeezed by rising education costs, healthcare expense and health insurance costs and the erosion in value of Social Security payments due to artificially low cost-of-living adjustments. Any growth in spending is being fueled by increased credit card and car loan debt, while the financial basis for repayment of that debt is eroding.
- Also in the WSJ today: US household debt increased by $35 billion in the last quarter. The debt was in the form of credit card balances and car loans. Excessive debt can place both types of lenders at risk. Another bubble?
Conservatives are pressing for reductions in government spending, much as they did in 1929, when government is the only means for intervention in the economy available to get it moving again. Japan has demonstrated what happens when government doesn’t act: three decades of economic stagnation. Can the US cope with that?
Conservatives look to technology to provide a path forward. However, technology changed from a net job creator to a net job destroyer in the 1990s. We can automate more than 40% of current jobs out of existence by 2040, but we don’t have anything for the people put out of work to do. (Source: McKinsey study, reported at http://www.visualcapitalist.com/charting-automation-potential-of-u-s-jobs/). The jobs to disappear address all levels, from CEO to anesthesiologist to taxi driver.
Some look at this future and see the best hope as a Martian colony. However, most people don’t have that option. Some are leaving the US for other countries, the American Diaspora about which I have written. One client of mine has found the quality of life in Saudi Arabia to be vastly superior to the US (and that client is female).
For the US, economic survival will require finding a “new way forward” that is real and different from the current, monotonous ideological mantras.
Ideology is a crutch. It is no replacement for intelligent thought.