It is not by injustice, therefore, that you hold what you have taken, rather it is through your own human kindness that the citizens are allowed to keep whatever they do retain.
Yet I foresee that if we betake ourselves to the life of indolence and luxury, the life of the degenerate who think that labour is the worst of evils and freedom from toil the height of happiness, the day will come, and speedily, when we shall be unworthy of ourselves, and with the loss of honour will come the loss of wealth.
- Cyrus the Great in CYROPAEDIA by Xenophon
I am perplexed. As I read the Federal Flow of Funds data, I’m struck by what appears to be a simple irony. In the FY 2009, consumer spending and debt have shrunk significantly and persistently (debt down $112 billion in FY 2009). During the same period of time, Federal debt has continued to balloon ($1.4 trillion in FY 2009). At its peak in 2006, consumer credit – the engine of the consumption addicted economy – rose to a high of $1.17 trillion.
The past 4 quarters have seen commentators and politicians describe their assessment that the economy is showing signs of recovery. However, this propaganda is, well, just that, propaganda. Here’s why.
First, the only thing that is contributing to economic activity is the Federal government’s spending of borrowed funds. In the most inefficient means of stimulating the economy (tax incentives) the Federal government is spending other people’s money to stimulate the automotive, housing, and manufacturing sector. As I said for the past four years, if you removed the premium of Federal spending (particularly in the indirect support of the war efforts in Iraq and Afghanistan) leading to S&P profits in defense, aerospace, materials and energy, we were in a recession before the “banking crisis”. Our GDP during the Bush administration was inflated and it’s even more so today. However, even the most casual observer can see that the Federal government doesn’t get the same economic return on its dollar spent as did the American consumer.
Second, we’re still living in the illusory world of an antiquated employment statistic. The fact remains that we have a growing number of Americans who are contributing nothing to the economy. We have more people who are beyond the 12 to 15 week without a job window who are either not working at all or are working in temporary situations or are otherwise under-employed. In the most recent March data, under-employment is over 20% and unemployment (U6 Figures) is still around 16%. Simply, this means that over 1/3 of the American population is not contributing to the economy. This cannot and will not last.
The myth that this is acceptable because “productivity” is higher is – well – just that, a myth. We are not more productive. Just because those who are employed are working longer hours and their marginal production per employee appears to be growing, this statistic fails to capture the fact that we’re riding an artificial wave of “value” inflated, to a large extent, by Federal government wage premiums. With more of the labor force working longer hours for real-dollar less wages, the Bureau of Labor Statistics is, once again, contributing to the consensus illusion that we’re making progress. We’re not. Paying fewer people less does not create an economy, it stimulates the French Revolution.
Cyrus the Great had it right. The day has come, when our carelessness about productively engaging our society to focus on real value creation in lieu of phantasmal “service” and “knowledge” businesses that supported consensus illusions as we saw our consumer addiction dealers off-shore the manufacturing of our intoxicants, must be reckoned. We must once again find honor not in the acquired wealth from others but in the honor of productive engagement. We must celebrate the industry that creates rather than blindly waiting to be served by those from whom we’ve taken so much. The drug is wearing off and we need to see clearly that creativity and production, supported by ethical exchange of value, is not a whimsical aspiration but rather the only way into a future with living.