Aug 15, 2011
The current economic mess in Western Europe and the U.S. brings to mind what I regard as the greatest challenge the West has to face, even greater than an aging demographic: middle-class jobs. We used to have a lot of good-paying jobs in the steel industry; now we have the Rust Belt. Before that, we had good-paying jobs in the shoe industry; now we have Italian shoes, perhaps made in China but subcontracted to Viet Nam. At any rate, no good-paying jobs in the shoe industry in New England. Before that, the textile industry left New England, went to the South. Then it left the South, went to... last heard from in China. The auto industry was filled with good-paying jobs (and bad management) in the '60s. Then came the computer industry...oops! Programming is done better and cheaper in India, and China is subcontracting the assembly process, though we still have Fabs and most of the engineering.
The problem, then, is how to restart the economy. The housing industry is supposed to lead us out of the slump (historically), but there are at least two problems: an overhead of foreclosed houses and -- ta daaa -- no one with a job that pays enough to buy a house. While "no one" is an overstatement, it does express the large contrast with the '40s, '50s, '60s, '70s and '80s. So, although liquidity is necessary, stimulus isn't stimulating the economy because there are so few jobs that pay more than minimum wage. Nor are the shareholders of the large banks, oil companies, and so on, getting big dividends, because the good-old-boy-&-girl network that runs the boards of directors, each for the other, has authorized billions to be spent, quite unnecessarily, on bonuses, thus removing the money from dividends and, for practical purposes, from the economy.