Another quarter--(yet) another dismally awful, stubbornly stagnating set of GDP figures--which come as yet another "shock" to the status quo. As John Cassidy (one of my favorite financial writers) offers in the New Yorker: "GDP Shocker: US on Verge of Double Dip Recession".What's going on here? Why continued stagnation, and perhaps more interestingly, why is the status quo always "shocked" by it, every dismal quarter? Here's what it suggests, in no uncertain terms: they're struggling to discern what this crisis is yet.
To illustrate, consider the chart. If you're expecting a "recovery" to mysteriously materialize out of the mists of bailouts, bonuses, and financial determinism, it's beyond alarming--it's confounding: GDP's been revised downwards for several previous quarters as well, suggesting the downturn's been much more severe than was previously thought. It means, to put it bluntly, not just that your expectations about the future were amazingly wrong--but that you've been retrospectively wrong about the shape and intensity of the crisis in the past as well.
All of which raises the question:
How long are we going to keep on trying the same old failed ideas--just harder? How long are we going to keep on listening to the same old discredited perspectives--just more intently? It's magical utopian thinking at it's finest: it hasn't worked for nearly half a decade--so clearly, we're not doing enough of it. Let's keep on doing more of the same--because one day, it's going to happen, for sure, I know it, believe me, just wait, keep the faith. (does this sound like the Rapture to you? It sure does to me).
It hasn't. It won't. It probably can't. Yesterday's solutions were built for yesterday's problems.
So here's a different narrative; a quick summary of one part of my little take about what's really going on.
The clanking, wheezing institutions of the industrial age are beset by a titanic flaw. They overcount real benefits, and undercount real costs. What happens to an economy built on such institutions? Simple: instead of authentic value being created anew, wealth is merely transferred from party to party. Hence, corporate profits spiking--while nearly every other party in the economy stagnates. Hence, Wall St growing fat off the public purse, while the government slowly goes into illiquidity.
The real problem is this: nearly every one of our institutions is broken. Think of institutions as software for human accomplishment. So here's the globe's challenge for the 21st century: reimagining and redesigning the software for human accomplishment.
Because the truly poisonous effect of industrial age institutions, by undercounting real costs, and overcounting real benefits, isn't merely that they limit us to creating fake, thin artificial value and ponzi-like hollow "profit" today--but, more perniciously, that they shatter the incentives for great achievement tomorrow. They crumple the human spirit, smash the human psyche, dull the human brain, and toxify the human heart (think I'm kidding? Read this).
An economy built on undercounting costs and overcounting benefits is one where we squander endless amounts of human potential on earth-shattering achievements like disposable razors with yet more blades, even more vulgar deodorant marketing campaigns, and gloopier, fattier "food-like products". Needless to say, the trajectory of such a system of human organization doesn't ascend to higher and higher peaks of prosperity--but descends into social fracture, drooling idiocracy, mass stagnation, and decline.
Hence, here's what a nation who wants to be tomorrow's powerhouse of prosperity really needs: a 21st century plan to reboot industrial age institutions. To reimagine and rethink the clunking, belching contraptions known as "GDP", "the corporation", "investment banks", "credit ratings", "jobs", "government", and more. To reimagine them as eudaimonic levers--tools that can amplify not the just "industrial output" of nations, but which can ignite and spark the highest human potential; levers that can raise people not merely into lowest-common-denominator faux-designer Jersey Shore material plenitude--but into meaningfully well lived lives. At it's worthiest, an economy is an engine not merely for "enrichment"--but for human prosperity.
Until and unless the first halting steps of a eudaimonic transition are made, here's what probably won't happen.
- Corporations will have little reason to invest in 21st century jobs, assets, or businesses.
- Investors will have little reason to seek and fund anything but incremental, yawn-inducing "innovations"--instead of groundbreaking breakthroughs that matter.
- People will have little reason to be more than mute "consumers" of mass-made junk
- Financial markets will be beset with extreme myopia and monopoly power, and the efficiency of capital will continue to fall
- Rent-seeking will continue to consume the "real" economy, and paradoxes of thrift will ensue
- Economies will continue to face steep levels of malinvestment, accelerating crisis, and recurring (ever more expensive) bailouts
- Societies will continue to fracture, polarize, dumbify, and ossify.
See the chart above? We can play this fools' game--squabbling and quibbling over the moldy remnants of the industrial age--until we're right back to hunting with stone axes. Or we can create a eudaimonic future. The choice is ours--and it always has been.
