Growth, or profit?

Over one trillion dollars has disappeared from the American economy, and it wasn’t the big corporations which lost most of it.  It was the American homeowner, the retired person, our children.  The value of our country shrank by a good portion of what it  used to make every year, and it is no where near returning to the levels of wealth creation that we all got used to.  The money that has disappeared was in the same category as the money that hasn’t been made yet, because it was just numbers in computers.  It wasn’t houses being destroyed, cars wrecked, bridges falling down, dams bursting, or planes crashing.

We suffered the kind of destruction of wealth normally only seen in wars, yet, most of us are still sleeping indoors.  While that is still true, we should consider what lead to the economic catastrophe that we are enduring.  What were we building with all of that wealth we used to have?  What were we creating that would have lasting value, or even create more value?  A cell phone network?  Shopping malls?  New cars?

What about bridges, high speed rail systems, fiber optic networks, advanced space craft, health care that is affordable without insurance, renewable energy?  What about all the wonderful things that were talked about 20, 30, or even 40 years ago?  Why have we let bridges fall down, roads fill with holes, and public transit decline?  Why is it such a wrenching change to deal with hiccups in the energy supply?

Because we have been after easy money, quick money, right now money.  How often are we reminded of the future in our media, our advertising?  Everybody wants their money yesterday, so that they can pay the bills they got the day before that.  Save?  That is what they call it when we pay down debt instead of shopping.  When we invest, we are putting our money into hedge funds, stocks, or collateralized debt obligations.  How are we going to pay for the future when all of our money is tied up making money right now?

This economic catastrophe has been on the horizon for years, yet no one has figured out how to avoid it while still enjoying the profits that we have come to depend upon.  We have gotten used to taking every year what used to be made in only the best of years, to the point that management is focused entirely on meeting the cash requirements of paying dividends to stockholders.  They have done this by slashing research and development, cutting production costs by shipping jobs overseas, and using lower quality.  Just a few years ago, General Motors paid out over 1 billion dollars in cash after losing over 8 billion.

We can continue to use all of our money to make money today, but we will sacrifice our standard of living to do so.  The alternative is to willingly lower our standard of living so that we can invest in things that won’t pay off for a while, things which will be needed by all of us.

Tags: consumer spending, credit crisis, debt, economic crisis, infrastructure, recession, resources, spending