I opened the news today, only to find this. It's exactly what I've been predicting, and we've been discussing.
A majority of those who backed President Biden in 2020 say today’s economy is fair or poor, ordinarily a bad omen for incumbents seeking re-election.
Now, as President Biden looks toward a re-election campaign, there are warning signals on that front: With overall consumer sentiment at a low ebb despite solid economic data, even Democrats who supported Mr. Biden in 2020 say they’re not impressed with the economy.
That’s how it seems to Kendra McDowell, 44, an accountant and single mother of four in Harrisburg, Pa. She feels the sting of inflation every time she goes to the grocery store — she spent $1,000 on groceries this past month and didn’t even fill her deep freezer.
A frequent theme of conversations with Democratic voters who see the economy as poor is that large corporations have too much power and that the middle class is being squeezed.
The economy's turned into a major flashpoint. In the upcoming American elections—and around the world. So. How did I know?
The better question is: how could anyone not know? We've discussed here many of the hair-raising statistics to have come out recently. 70% of people feel "financially traumatized." The same number think the economy, money, etcetera, is a significant and serious source of stress. Those are numbers that are like nine-alarm fires to the economist in me.
Let me put it to you bluntly. Hold on while I put on my bona fide World's Top 50 Thinkers Beret. The economy sucks. Sucks.
Now. Why don't politicians—with the exception of demagogues, unfortunately, get it? Why do they appear to go on gaslighting the rest of us and telling us things are fantastic? They look at traditional indicators. The numbers that I've highlighted for you above are about people's lived experiences. Traditional indicators are about average, aggregate abstractions—growth, "job creation," and so on. Lived experiences are about well-being. And what else do we know? In this age in history, we're experiencing a massive crash in well-being. The economy sucking is part and parcel of that.
So. Why does the economy suck? There are three answers, and I'm going to take you through them, step by step. They apply to America, the world, and our civilization, in that order.
America. Why does it's economy suck—in such surreal, weird ways that I've described it as the world's first poor-rich country? The vast majority of people are distressed by the economy, struggle to make ends meet, live in perpetual debt and so on. Not good. Shouldn't happen. So what went wrong here?
America never developed a modern social contract. Instead, thanks to a legion of crackpots, more or less—Newt Gingrich, his ilk, various economists you've never heard of who don't really matter, the only thing you need to know is they had cuckoo theories—it attempted a Grand Social Experiment. It tried to become the only nation in the world without public goods.
So today it doesn't have them. Americans famously—or infamously—don't enjoy any of the basic public goods Canadians or Europeans or even by now people in middle-income countries do. Universal healthcare, retirement, affordable higher education, transport, media—it's long, long list. Those things are rights in much of the rest of the rich world, and so of course institutions were created to enact them. Think of the way altering the French pension system became a flashpoint for Emanuel Macron.
Thanks to this Grand Social Experiment, in America, everything that should be a public good is privatized. Abstract jargon, but think of the effects. Americans now have to pay eye-watering amounts for...the basics. Healthcare's the most globally famed example—half of Americans struggle with medical bills or medical "debt." But by now, even getting a foot on the "housing ladder" is an immense challenge for many.
So think of an American life. You're born, if you're lucky, your parents have money, and send you to a good university—which costs more than buying a home. Then you perhaps do a graduate degree, on your own, and enter the labour market, laden down with debt. As you age, those medical bills begin to mount. You have to educate your own kids. The price of a home never goes down. And then there's the elusive dream of retirement. All of that's privatized in America—to the point that it has weird institutions which don't exist elsewhere, like "401Ks" or "medical billing departments" or vast student debt and so on.
Now. That's not to say that private stuff is bad or wrong or evil. Not at all. But. Privatizing public goods to this extreme, and it is an extreme, is what's a big mistake. That's not my opinion, it's not a matter of theory anymore, even. Now, we have the evidence of America's Grand Social Experiment before us, the results, and they're pretty cataclysmic. No matter what happens, for most people, the economy still sucks, and keeps sucking.
So this Big Idea—Let's Not Have a Modern Social Contract—didn't work. Empirically, factually, in practice. It just created a Darwinian, dog-eat-dog society, in which people are seriously and perpetually distressed, by having to compete, over and over again, for what should be universal basics. And young people, amid this mess, who bear its brunt, are falling apart in shocking ways. Meanwhile, in places like Canada, people are happy, society's more stable, and life is generally pretty good, precisely because modern social contracts...work.
That's why the American economy sucks. It's not a short term problem. It's a long term consequence. Without a modern social contract, you're limited to this level of human development, well-being, this set of life experiences—distress, despair, anger, ripping across society, as life become a bitter, brutal struggle. Just the basics are perpetually out of reach, because of course, when maximum profit is to be gained from them....why would they be provided fairly or universally or adequately?
There's a very interesting example of all this which we'll discuss in its own little post—DC just filed a lawsuit against a company which it alleges basically uses an algorithm to manipulate the housing market, and keep prices artificially high.
That's level one: the American economy. But it's not just America. It's the world. Look at The Netherlands—there, ignoring the warnings of history, sadly, people just elected the far right. Why? Economic concerns were among the top issues. The same happened, too, in Argentina.
We live in a what's come to be called a "global cost of living crisis." In plainer English, we're now in an age of stagflation. Stagnation and inflation. I often warn they're the two worst things that can happen, and now they're happening at once. On the one hand, prices have skyrocketed, and on the other, our economies are stagnant in real terms—even if there's "growth," it's mostly just an illusion: people struggle to get by, the lion's share of gains go to the ultra rich, and incomes have fallen.
This is a more zoomed out picture of why the economy sucks. The global cost of living crisis is very real. But politicians and leaders don't often remind people of it. that gives the far right, demagogues, crackpots, lunatics, the opening they need. Instead of saying to people, "this is a problem across the globe, and we're all going through this together—it's not just about our country, or anything we did, it's much, much bigger than that, it's about the world," what happens? Leaders in the center and on the left pretend the economy's not an issue. So of course, the far right can move in, and employ its scapegoating tactics: now, "our" economy sucks because it's the fault of those dirty subhumans, whomever they are, immigrants, refugees, the LGBTQ, women, journalist, professors, just choose a target.
The global cost of living crisis is about the globe. It's got nothing, zero, zilch to do with any set of scapegoats. How could it? Think about the world. Trump scapegoats immigrants, who are experiencing it in their own countries. Britain scapegoated Europeans, who are now turning around and finding their own scapegoats. None of this folly is constructive, true, or illuminating in the slightest. It's a fool's game, because of course, our economic woes, if they're global, as they are—that means it can't be any particular scapegoat's fault. These troubles apply to the world, and so blaming them on this group in this country or that group in that country—it's as staggeringly short-sighted as it appears to be.
That's level two, and it's really important that we all understand it—because our leaders on the center and left do an Absolutely Terrible Job with this issue. Instead of acknowledging it, as I've explained, they deny it and ignore it and minimize it, more or less driving people into the arms of the far right. It's just a Politics 101 Level Mistake: the IMF and World Bank literally focus relentlessly on this issue, because it's one of the biggest in modern history, and yet here we are, supposed to pretend that a global cost of living crisis isn't happening. Who benefits from this stance of willful ignorance? Only the far right, which is more than happy to offer people an answer, even if it's a foolish one, nationalism, bigotry, hate, rage.
So. Why is there a global cost of living crisis? Now we come to the crux of the issue, the real issue. We are out of steam. Out of juice. The old paradigm doesn't work anymore. Growth rates have been falling for decades. And if we actually calculate what the economy delivers, it's not enough. One thing we're going to release shortly at my little consultancy is a Green GDP, which subtracts the costs of carbon from GDP. What does it show? In real terms, there is no growth.
So what we have in real terms is something like this. No real growth. Meanwhile, somehow, the wealthy grow immensely wealthier, while the average person's caught in the monstrous teeth of the crises above—the cost of living crisis, the crisis of human well-being, and so on. If there's no real growth, that can only be because wealth is being extracted. That's the point that Thomas Piketty often makes, too. In formal terms, we call that, sometimes, "looting."
And that tallies with how it feels. What do people think about the world, intuitively, about their lives, societies, place in the economy? That the game is rigged, that no matter how hard you work, it never seems to pay off fairly, that the venal and cunning get ahead, and there's no real point to playing by the rules. Again—a clear setup for the far right, no? That's precisely the pitch it gives people. That feeling, sadly, is more or less correct.
Let me now put that in formal terms. What we have is a lack of civilizational surplus. Because looting's taken the place of long-term investment. That's crucial. Surplus is what made civilization in the first place. Agriculture created a surplus that allowed specialization, ie, everyone not being a subsistence farmer, and ultimately, all the stuff of civilization developed—libraries, universities, hospitals, markets, town squares, art, literature, medicine, science. Everything depends on surplus.
But we're now at a critical turning point in human history. We appear to have crossed a line from surplus into the red, if you like. How did we do that? We're overshooting planetary boundaries, and meanwhile, financial debt levels are off the charts, let alone when you factor in ecological footprints. Industrialization led to climate change, and now it's not so easy to generate a surplus, because the low-hanging fruit has been picked off, and meanwhile, every dollar of profit or income for an economy comes with a higher and accelerating risk of calamities. See the way insurers just pulled out of California and Florida? The world's wealthiest organizations can't bear the risks and costs of catastrophe now. That's what a lack of surplus means in hard terms. Systems begin to fail and crash.
So how do we develop a surplus again? Well, by now you should know. Probably we need to rebalance the scales of immense wealth, and pour that capital back into investment, which would create the industries and jobs and careers we so desperately need, instead of the low-quality dead end side hustles and gig work of today. Surplus comes from investment, just like it did in the days of agriculture. As you sow, so shall ye reap. Only we haven't been sowing enough for quite a while now, decades, and right about now, as the world turns cruel and embittered, lashing out instead of cooperating and investing, all we're really sowing is dust and famine and drought.
All of that's why the economy sucks. Nationally. Globally. Civilizationally. You should understand it at all these levels. The world's in chaos, everything seems like it's breaking, melting down, crashing around us. There's a reason for that. The old paradigms and models don't work anymore. We need to reinvent them. But we can't do that until and unless we understand how all of this is connected. It's not some kind of coincidence that the economy sucks this much in this many places for this many people, driving them mad with distress, rage, fear, and despair. It's a relationship. The economy sucks because it's failing. Our challenge is to reinvent it, but you don't solve a problem at the level it was created—so to do that, we're going to have to rethink a...lot of things. Who we are. What our organizations are here for. What kinds of societies we want. What kind of civilization we should have.
And as we grapple with those tough questions, we must remember the first lesson of all. Everything we think of as civilization comes from surplus, invested back into the common good. Without that? We see what happens, in the dire days of this rising dark age. When what should be a surplus for all is skimmed off by the powerful and the wealthy, for the sake of vanity, hubris, to cheat death, to divide, to acquire—progress halts, and the project of civilization begins to implode.
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