Missing the Point: The Chimera of “Full Participation”

Much ink has been spilled of late over employment rates– job creation, unemployment, and “participation.”  While the first two are the most frequently cited as indicators, it’s the latter-most– the percent of Americans who are working– that, it is implicitly argued, speaks to the actual presence or absence of a recovery.  If percentage participation returns to historical levels, our personal-income-converted-into consumption economy will recover.

But as the ever-illuminating Calculated Risk explains here and here, there are fundamental demographic reasons why participations rates won’t– can’t– return to their historic heights.

Some of the recent decline in the participation rate has been to due to cyclical issues (severe recession), but MOST of the decline in the overall participation rate over the last decade has been due to the aging of the population. There are also some long term trends toward lower participation for younger workers pushing down the overall participation rate.

This decline has been visible in prospect for years– demographic dynamics are very slow to change– and it’s going to continue, as this chart (based on BLS economist Mitra Toossi’s projections) illustrates:

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To put those rates into demographic prospective, this plot (from The Census Bureau) illustrates the “Baby-Boom-rabbit-passing through the snake” demographic dynamic that defines the U.S. today and into the future:

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The argument over employment these days is over how to increase participation; there’s implicit agreement that a) this is the right thing to do, because, b) it will create the conditions for a recovery.  The problem is that, past a relatively minor point, we can’t.  While the U.S. isn’t in nearly the demographic straight-jacket that binds most of Europe and Japan and China, there is a very real ceiling on participation… and that ceiling is falling.

So if we are to make a material dent in the problems that ail us, we’re going to have to respond differently than we have been.

For a start, we might note that the primary reason that we have are in a somewhat better demographic position than– that’s to say, not quite so aged as– other developed countries is that we’ve enjoyed strong immigration of relatively young (working and child-bearing aged) folks from countries/cultures that value family.  That’s dropped off in the xenophobic wake of 9/11– and that’s aggravated our problem.  There are myriad reasons that immigration reform is important; for the purposes of this argument, suffice it to say that it could go a long way toward replenishing and reinvigorating our work force– and generating the income on which our economy and the society it supports depend.

And we’re going to going to have to re-focus our efforts on creating new, higher-value-added kinds of jobs– and on creating the populace that can fill them.  Even if there weren’t a falling ceiling on participation, it wouldn’t be enough simply to stamp out thousands of new low/minimum-wage service, retail, and health care jobs.  If employees don’t earn enough to be viable consumers, the consumer economy– and the social services that depend on it– will continue to shrink.

At the same time, we need to be less concerned with recovering what we’ve lost; more, with trying to invent the new jobs– in alternative energy, biotech, nanotech. et al.– that can create enough value to allow for reasonable wages.  And that of course means that we have also to be making the social and physical infrastructure investments– education/training, health care, transport, telecoms, et al.– that those emerging fields require… and that other countries are already making.

Of course, the devil is in the details of observations as over-arching (and, one hopes, obvious) as these; they are complex challenges, surely difficult to meet.  But it’s the direction– and the commitment to that direction– that matters: if we are not, as a nation, even trying to meet them– and at the moment we are not– there’s no real chance that we will.

Auguste Comte may have over-reached when he said that “demography is destiny”; but demography is certainly a defining dynamic of the reality that we have, as a nation, to navigate.  And so we’d do well to recognize demographic reality for what it is– and to stop arguing, as politicians on all sides have lately been doing, over the right ways to do the wrong things.

“Will Work for a Job,” Part Three

Further to “Will Work for a Job,” Part One (and Part Two), this bracing chart from the IMF…

(via Paul Kedrosky, TotH to Tim O’Reilly)

For a more detailed look, see this set of charts (pdf) from the April 2010 World Economic Outlook.

Government debt often finances crucial infrastructure, social services, or innovation.  But the huge upsurge in government debt from 2008 was much less a function of investment in “assets” or social goods than it was the price of stabilizing their economies– it was the bail-out.  Whatever my reservations about how the bail out was conducted across the developed economies (and how unevenly the benefits accrued), it seems to me clearly to have been necessary:  the alternative– total meltdown– being much worse.  Still, the reality is that this huge increase to national debts didn’t buy any future benefit or capacity; it simply covered the accumulated cost of irresponsible speculation.

And so, huge debt.

To be sure, more developed economies have more developed capacities to service debt.  For example,  U.S public debt was, in the years immediately following World War II, at the same kind of level (measured in % of GDP) as foreseen by the IMF; within a decade, it had been reduced by over half.  But that reduction was driven by the extraordinary economic growth of the U.S.in those post-war years, largely fueled by the increase in consumer demand occasioned by the growth of civilian employment, the rise in home ownership and spread to the suburbs, and the baby boom…  forces that laid the foundation for continued growth over the next couple of decades.

Current demographics in the U.S. and the rest of the developed world suggest that the next decade will have a very different character. The developed economies’ capacity to handle their debt will diminish as lower birthrates mean that their citizens will increasingly age out of the work force, and begin drawing services even as they cease to contribute to their funding…  add in the cost of responding to climate disruption, keeping aging infrastructure serviceable, et al., and it’s a pretty strained picture.

Necessity is, as we know, the mother of invention.  Japan, for example, is looking to robots to bridge the worker gap…  but even then, is having to plan for a tight squeeze.

For the rest of the developed world, immigration is the more obvious remedy; indeed, 2.5 million immigrants contributed to US growth in the Fifties (ten times as many as entered in the Thirties). These immigrants stepped into jobs all over the country– and they contributed new ideas, built new businesses.  They contributed to overall economic growth and contributed to support the social services available to all Americans.

But, as history reminds us, immigration will effectively remake societies even as it “saves” their economies.  Many see this growing diversity as a strengthening and enriching of the society (as well as the economy); I do.  But as the rise of anti-change nationalist nostalgia movements (like the Tea Party in the U.S., Le Pen’s National Front in France, and others throughout the developed world) illustrate, many others disagree– disagree loudly enough so far to have frustrated the reform of immigration laws in most of the (currently-)rich world.

In Part Two of this post (and elsewhere), I try to argue for a U.S. marketplace genuinely open to innovation and to the emergence of new, and new kinds of, businesses– as ours decreasingly is.  It seems clear to me that we need, similarly, to be more open when it comes to immigration as well.  On both those fronts, there are myriad ways to get it wrong.  Try as we might– and as we must– to legislate, regulate, and operate effectively, we could fail.  And indeed, opponents of these moves– apologists for advantaged incumbents and xenophobes– are quick to catalog the risks, to argue against taking action.

But the alternative?  We know that doesn’t work; indeed, that’s what drove us into the trench that we’re in.  We’ve got to find a way past the status quo– accelerating consolidation, enhancing the power of oligopolies, “retiring” people for whom there is no plan for support– or risk having to learn the same painful, costly lessons all over again.

In the meantime, further to Part One– and to observe the obvious– money spent paying interest is money that is not being spent on the things that can build a strong economy, reduce the level of debt, and fuel a healthy society.

“Will Work for a Job,” Part Two

As we face the situation recounted in Part One…

We’re all going to be making economic sacrifices for awhile, making cuts in order to dig ourselves, individually and as societies/economies, out of the trench into which we’ve fallen. There is, in country after country (and household after household), a great deal of arguing about which things to cut, and how far; there’s even (I believe wise) talk of restructuring the worst of the debts to make them more manageable.  Still, there’s no disagreement that something has to give, and that one way or another, the sacrifices required will denominated in some combination of lower consumption and reduced government services.

But as Lou Gerstner knew when he took on the turnaround of IBM, we can’t save our way to growth.  We can cut to stop the bleeding; but if we want to create opportunity and the possibility of improvement and growth, individual or national, we have to find ways to add new value– value that will translate into employment and well-being.  In theory, this new value can be created in incumbent companies or in innovative new ones; historically, it’s come from some combination of both.

But this time around, there’s data suggesting that we will be unusually reliant on innovation and entrepreneurs to create jobs– that’s to say, that incumbent companies can’t/won’t…

Celerant Consulting, an HR consulting firm, has just released  a corporate workforce productivity study, drawing on a  review of hundreds of subjects across the developed world (download a pdf of the report here).  The striking findings are summarized in this chart:

source

As the report observes,

Across all four industries surveyed – Energy, Chemicals, Healthcare, and Consumer Staples – the Impactability Study revealed a similar pattern of inefficiency. Value-add activity accounted for 50 percent or less of time spent on the job, leaving significant room for improvement. Although areas such as Healthcare and Chemicals are to some extent exposed to greater bureaucratic hurdles that direct more hours to approval processes, there is no question that each industry can reduce costs by refocusing the organization’s workforce.

One can quibble with Celerant’s methodology, and argue for marginally higher or lower productivity numbers in one sector or another.  But I doubt that anyone feels that the report is fundamentally wrong.  In our hearts (and minds and stomachs) we know that organizations that struck their “Coase balance” when the state of technology and society were very different, and have accreted layers of organizational sediment ever since, are bound to be inefficient today.  From Dilbert to The Office, we recognize the situation even as we laugh at it.

So, there’s plenty of productivity to be had in incumbent companies without adding any staff.  Indeed, these big companies may even be able further to reduce their employee costs, either by continuing to reduce staff or by holding– even lowering– wages and salaries.  Indeed this is what the Bureau of Labor Statistics suggests is happening: productivity up; labor costs down…  Not very good news for the economy as a whole, in which employment is a continuing concern; but OK for shareholders, right?

In the very short-run, maybe; but overall, not so much.  Companies that are focused on cutting costs, in which employees are fearful of their salaries or jobs, are not hot beds of innovation.  There are exceptions, like IBM under Gerstner; but they tend to prove the rule:  most often, companies in the Celerant boat are trying to figure out how to do the same things with less (or, like the airlines today, to do less with lots less).  Innovation in companies like these too often amounts to figuring how how to charge more for the same thing (c.f., airline “service fees”).  This is, as Gerstner knew, no way to build a profitable, growing future.

Clearly, big, incumbent companies should try to innovate.  Some (again, pace Gerstner) may get it right.  But, for all these reasons, many more probably won’t– if they even try.

So, if incumbent companies aren’t likely to create the innovation and employment that we’ll need to achieve sustainable growth in our economies, where will we find it?

It’s been long believed that small businesses, and the jobs they create, lead economies out of recessions.  Surely, they have historically played play an important role (a role threatened by the current contraction of capital available to them.)

But Paul Kedrosky argues that we should look more specifically to new companies.  Using the mathematical  idea of the “drunkard’s walk” (a version of the probability theory concept of the random walk), he illustrates the “inevitability” that new companies are key…

…the central thing about job creation from young companies is its inevitability. It is a species of mathematical certainty (one driven by initial simplicity and a wall) that young companies must create the most jobs (even without assuming particular skill on their part, or taking into account sectoral or economic growth, both crazily conservative assumptions).

“Crazily conservative assumptions” indeed.  Those new companies are– certainly not entirely, but largely– exploring the frontiers of the market.  They are innovating products, services, and processes– creating the “stuff” of real economic growth.  And they are giving their employees the opportunity to learn the skills and work habits that can achieve it.

So while cutting away the fat in incumbent companies and established markets is both necessary and useful to economic renewal, it doesn’t begin to be sufficient.  Real growth requires the creation of new value, in new ways.  And while there are some older, bigger companies that can pull that off, it is historically the role of small, new entrants– of the entrepreneurs and their start-ups.

How do we encourage new business, create the conditions in which it can help us out of the trench that we’re in?  There are detailed answers being developed in lots of spots, e.g., at the Kauffmann Foundation.   Here, let me suggest one very obvious theme:

If we want to encourage innovation and entrepreneurship, then we have to stop pursuing policies that pre-empt them by advantaging large incumbent companies and their desire to preserve– and milk– the status quo.  From obvious fronts like financial, securities, and anti-trust regulations, to corners as seemingly arcane as the patent process, the deck is stacked.

Indeed, these policies knit together to become a kind of “pro-consolidation platform”– one that both parties have adopted.  The results, we’ve already begin to see:  the financial crisis, the reduction in meaningful consumer voice and choice in an increasing number of arenas, the feudal concentration of income, wealth, and power in a big-bank, big-company elite…

source

Beware the Land of the Giants– it is a barren place.

As Adam Smith argued, markets can be a wondrous thing, they can lead to increased economic growth, increased welfare, and increased equality– but only if the governments that legitimize and police them work to be sure that they are actually “open” and “free.”

“Will Work for a Job,” Part One

Thursday’s mysterious Space Mountain-like stock market plunge aside, the domestic U.S. economic news last week seemed pretty good:  employment up, personal consumption expense up– sounds like a recovery.

And a recovery it may ultimately be.  But a peek underneath those number and a look out at the global economy each suggest that it’s premature to party…

My friend, anthropologist Grant McCracken, is an insightful observer of the American consumer.  Last year, as many were arguing that a new frugality– a “new normal”– was sweeping the nation, he begged to differ.  In The Harvard Business Review Blog, Grant argued that consumers would soon be spending again as though it were 1999. And indeed, in Q1 consumer spending added 2.6 points to GDP growth, following a strong Q4 last year.

But as Calculated Risk observes, the entire increase in consumption in Q1, and most of the growth in prior months, has been due to government transfer payments and reductions in personal savings.  That’s to say: Grant’s right, we’re continuing to spend…  we’re just not earning to support the expense.

click image to enlarge (source)

Perhaps that’s at least in part because we’re still not working.  This week’s report of 290,000 new jobs notwithstanding, the unemployment rate rose to 9.9%.  Add in the number of workers who are involuntarily on reduced hours and the number (U-6, as the BLS calls it) swells to 17.1%.  And then there is the record number of people unemployed for 27 or more weeks– 6.72 million, or 4.34% of the work force.  To put this in perspective, the recession of the early 80s peaked at 10.3% unemployment; but long-term (27+ weeks) unemployment never rose above 2.6%… to wit, the preponderance of transfer payments as noted above.

click image to enlarge (source)

There are lots of signs that can signal an economic rebound; but in the end, a sustainable recovery will be built on employment, on jobs.  In Part Two, a look at where those jobs might (and might not) be found.  But first, a quick look at the global context in which any U.S. recovery will have to make its way.  In a way that’s analogous to the domestic employment situation, underneath the good news of the moment, there’s trouble.

To wit, the news this morning of European-IMF agreement on a bail-out plan for Greece:  it’s encouraging…  But friend Peter Herford recently forwarded a terrific (albeit, mildly terrifying) piece from Der Spiegel, looking at the underpinnings of the European debt crisis: “The Mother of All Bubbles.”

Greece is only the beginning. The world’s leading economies have long lived beyond their means, and the financial crisis caused government debt to swell dramatically. Now the bill is coming due, but not all countries will be able to pay it…

Here, too, we find ourselves returning to jobs as a– the– central concern…

As we think about the ways in which we in the developed world have lived beyond our means, we arrive quickly at the extraordinary accumulation of public debt that’s the “hero” of the European drama (which isn’t to say, of course, that it’s not an issue in the U.S. and elsewhere):

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…and at the kind of private debt– commercial, mortgage and consumer credit– that contributed so powerfully to the 2008 meltdown:

source

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But as we consider private debt, it’s worth calling out the corporate/commercial component– the bit that’s directly related to the businesses that provide jobs.  While there have been some bankruptcies among over-levered companies, corporate credit doesn’t seem, given the relative paucity of attention its gotten, to have played much of a role in getting us into our current pickle.  Indeed, most of the concern about corporate debt since 9-15-08 has been around whether there would be enough of it to support a recovery.

If governments are going to be reducing their services, then growth will have to come from new/higher incomes, from real growth… and that– the creation of those new jobs and of those higher incomes– is the role of business.   If we’re going to climb out of the trough we’re in (a trough that, if Spiegel is right, could be about to get deeper still),  business must create new (and new kinds of) value, and in so doing, create jobs.

And so, to Part Two…

“…what remains after one has forgotten everything he learned at school.”*

The Bureau of Labor Statistics reminds us that it’s smart to stay in school:

But as Calculated Risk reports, while unemployment among the best educated is still lowest, it’s increased as much in percentage terms for them during this current recession as for any other group.

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One notes that all four groups** were slow to rebound after the 2001 recession– not an encouraging reminder if one is hoping for a brisk employment-led, consumption-fueled recovery this time around.

But in some ways more striking is a difference we might expect, but that hasn’t yet emerged.  Calculated Risk:

I’d expect the unemployment rate to fall faster for workers with higher levels of education, since their skills are more transferable, than for workers with less education. I’d also expect the unemployment rate for workers with lower levels of education to stay elevated longer in this “recovery” because there is no building boom this time. Just a guess and it isn’t happening so far … currently the unemployment rate for the highest educated group is still increasing.

Clearly, from an individual’s point-of-view, it’s still smarter to get more education than less.  But the perturbations of past periods remind us that the gearing between between academic degrees and financial success isn’t always perfectly tight…  Indeed, those with sharply-defined professional credentials in fields– e.g, finance– that are unlikely even in the intermediate term (if ever) to recover their bubble-fueled growth rates, may find their advanced degrees at best unhelpful; at worst, downright prejudicial.

Economic recovery and growth will be driven to some large extent by innovation; that innovation will create new– and new kinds of– jobs.  Looking even just five years out, much less ten, one has to admit that it’s just not possible to predict what these emergent jobs, nor their requirements, will be.  (Consider, e.g., the hottest topic– and job category– in marketing/advertising these days: “social media marketing”…  which wasn’t even a glimmer a decade ago, and was just being born five year ago.)  This is a challenge for those new to the work force, who have to wrangle the product of their schooling and their personal experience into a shape that can fit the entry-level positions they seek.  It is a much bigger challenge for those  mid-career who find themselves needy of making a move:  these more mature folks have not only to learn new fields, they also have to re-direct the considerable momentum of perception and habit that characterized their old– and they have to do those things, usually, in ways that justify salaries way north of entry-level.

All of which underlines for your correspondent the extraordinary value of a liberal arts education.  When one is faced with a “working adulthood” that is one transitional challenge after another, no skill is more valuable than the capacity to adapt.  And no capability is more central to that adaptation than the ability effectively and efficiently to learn.

This is precisely what, at its core, a liberal arts education is about:  learning to learn.

There are many, many other reasons, rooted in personal and societal benefits, to pursue a liberal arts education, and top support a strong foundation of liberal arts in higher education.  But the lessons of the last couple of years– indeed, of the last several decades– suggest that the economic rationale is plenty strong as well…

And besides, it’s fun.

* “Education is what remains after one has forgotten everything he learned in school.”
- Albert Einstein

** To put these cohorts into perspective, the Census Bureau suggests that, of these folks “25 yrs. and over” (in 2008):
- 13.4% had less than a high school diploma.
- 31.2% were high school graduates, no college.
- 26.0% had some college or associate degree.
- 29.4% had a college degree or higher.

UPDATE:  Reader JK directs our attention to another treatment of the data, in the NY Times. As he suggests, even more dramatic.

Advocate Lobbies To Make Small Business Even Smaller…

source: Berkeley Rep

Further to “Main Streets or Mean Streets,” this from the ever-insightful Simon Johnson:

The US Chamber of Commerce is opposing the administration’s proposed Consumer Financial Protection Agency, on the grounds that it would hurt small business.  Their argument is that this agency will extend the dead hand of government into every small business.

For the Chamber of Commerce, government is the enemy of small business and should always and everywhere be fought to a standstill.  Chamber Senior Vice President (and former Fred Thompson campaign manager) Tom Collamore sees this as “advocacy on behalf of small businesses, job creators, and entrepreneurs” (quoted in the WSJ link above), and the Chamber has launched the “American Free Enterprise” campaign.

Somewhere, the Chamber’s senior leadership missed the plot.  What brought on the greatest financial crisis since the 1930s?  What has hurt, directly and indirectly, small business of all kinds to an unprecedented degree over the past 12 months?  What is killing small and medium-sized banks at a rate not seen in nearly 80 years?

It’s the behavior of the financial sector, particularly big banks and their close allies – by consistently mistreating consumers.  And the letter and spirit of the regulatory regime let them get away with it.

Some members of Congress honestly believe that consumers should have a free choice, unfettered by any kind of restriction, regarding the financial products they buy.

But spend time talking to any marketing professional or call them to testify before your committee – or just ask Mr. Collamore, who was previously at Altria.  The state of knowledge regarding how to persuade people to buy stuff is impressive, the degree of potential manipulation for consumer preferences is simply stunning, and the “innovations” in this area are not slowing down.

The scope for taking advantage of consumers in subtle ways, or outright duping them, is probably higher for finance than for any other sector.  For fairly obvious reasons, people are more likely to misunderstand credit than, say, furniture.  Ambitious executives have therefore hammered hard on borrowers.  And the implications – as you have seen and are still seeing – of systemic financial misbehavior are awful in terms of human impact and essentially without limit in terms of ultimate macroeconomic downside.

Unscrupulous Finance has brought us down and will do it again.  Those most damaged now and in the future include small and medium-sized business owners who are trying to treat customers fairly.

The Chamber of Commerce is fighting the last war (or the one before that).  Their small business membership should wake up to the current reality and press the Chamber hard to change its position before it is too late.

President Obama needs to go over the heads of the Chamber’s leadership, reaching out to and running ads directly targeted at its small business membership.  The White House has to tackle this head on, framing the issue clearly for people with the help of very clear TV and radio ads.  The Chamber of Commerce is arguing that unfettered finance is good for small business.  They are wrong.

As Tom Frank has asked, “What’s the Matter with Kansas?“

Main Streets or Mean Streets?…

Dark clouds have gathered over small business in the U.S.– and over the prospect that it can lead us out of our economic morass in the way that it has in the past.  Two charts from Calculated Risk tell the unfortunate story:

1) Job losses (from peak pre-recession employment levels) have been worse in this recession than in any since the Great Depression:

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2) Those job losses have come, in this recession, much more heavily from small business (45%) than in the last recession:

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… Which together suggest that there’s less chance than our recent experience might suggest that small business will lead a recovery.  As Dr. Melinda Pitts of the Atlanta Fed (the author of the second chart) suggests:

Looking ahead, it’s not clear whether small businesses will continue to play their traditional role in hiring staff and helping to fuel an employment recovery. However, if the above-mentioned financial constraints [contraction in available credit; see here] are a major contributor to the disproportionately large employment contractions for very small firms, then the post-recession employment boost these firms typically provide may be less robust than in previous recoveries.

The implications of this hit to small business for the pace of a recovery are obvious and discouraging.

But in many ways more concerning are the the implications for the shape of a recovery.  As our economy begins to move up and out of the trough in which it’s mired, big companies will be playing a relatively larger role in the economy– and will be getting bigger (both relatively and absolutely).

Case in point: this morning’s New York Times reports that “Support Builds for Tax Credit to Help Hiring.”  But while one of the aims of the bipartisan sponsors of such a move is “to encourage small-business development,” it’s questionable whether it can.  Those tax credits will be useful only to companies that can find the cash to invest in new jobs that can generate profits to shelter… and in the credit-constricted environment in which we currently sit, that means companies that have either lots of cash or the “too big to fail” credibility that gives them access to debt.  In the current environment it does not mean small business.

Per “Beware the Land of the Giants…,” this is a dangerous situation; all growth is not created equal.  We live in a dynamic global market, where a nation must innovate or fall behind.  And we live in a nation in which wealth and incomes have polarized, and middle- and lower-class real wages have steadily fallen for over a decade.  Leaving aside the powerful arguments for fairness, considering only the economic, we live in a nation in which the lives of most must improve if there’s to be enough consumption to support all.

Which is all to say that, in the situation we’re in, it is not sufficient for the U.S. simply to stabilize its economy; we must reinvigorate it.  And if we’re going to re-energize, that means that we have to find ways to encourage small business, from main street shops to start-ups that aspire to grow into mega-corporations.

And that means that we need to rethink the ways that our government is “helping.”  As noted before, the one thing that the TARP funds did not do is the one thing they were meant to– re-start the flow of credit.   Thus, the continued decline in employment.

So, when the second round of “The Stimulus” comes (and it surely will, whether it’s acknowledged as that or not), it’s critical that it come with enforcement that assures that it is put to its intended purposes.

Similarly, as Congress looks to take steps that will be perceived as responsive to the pain that Americans are ever more widely feeling, it’s critical that those steps– from tax incentives to regulations– actually are responsive.

It’s not so complicated; but it’s hard.  It’s hard because the extraordinary tide of funding flowing into Washington to shape Congressional action– lobbying monies, campaign contributions– is flowing primarily from large, entrenched interests: the big, who want to get bigger.  The change that we need will come despite those efforts, not because of them.

We can, and we should, do our best to keep our Congresspeople honest and on mission.  And, given our not-very-encouraging experience of that effort, we should lean into effort’s like Larry Lessig’s Change Congress.

We are for sure going to continue to pay for the excesses of the past few decades.  The only question is whether we can convert that heavy penalty into the price of renewal.

Let’s go surfing now, everybody surfing now…

It’s like a “Currency Encounter of the Third Kind”:

source

In the gloom of Robert Mugabe’s benighted rule, the inflation rate in Zimbabwe rose to over 1 million percent last year.

So, per this January 30 U.N. memo, the bill above is worth less than one U.S. dollar…  a lot less.

It takes Z$150 Quadrillion to buy US$1…

This continuing erosion of currency value is pushing the price of more and more items out of the reach of regular Zimbabweans…  and turning everyday purchases into logistical nightmares, e.g., this man purchasing a loaf of bread with exact change:

source

… All of which is bad and sad… and might seem, at this distance, almost quaint.  But lest we be so dismissive, we might recall that as we in the West, but perhaps especially the U.S., plot a course through the troubled economic waters in which we’re sailing, we have not only to avoid the Scylla of deflation, on which so much attention– and, rightly, fear– is focused;  we also have to steer clear of the Charybdis of inflation.  (We are, after all, looking to spend close to a Trillion dollars that we don’t have, on top of the 10+ Trillion dollars in loss that we’ve run up over the last eight years.)  Over-steering to avoid one of those traps puts us at risk of the other.  In forming and executing a recovery strategy, as in so many things, balance is everything.

So as we fret over the stimulus package– is it big enough? is it fast enough?– let us be mindful of the cautionary example of Zimbabwe (or of Israel in the first half of the 80s or of Germany in the Weimar 20s or of… well, you get the point).   Let us seek balance.

But let us understand how hard that is, especially in a partisan climate abetted by the echo chamber that the news media has become.  As Susan Sontag once wrote:

The truth is balance. However the opposite of truth, which is unbalance, may not be a lie.

The temptation, in the face of a complex challenge like this can be to hesitate, to ponder; to wait while we titrate the precisely right mix of steps.  But even if getting the mix “just right” in a single, carefully-considered step were possible (and I don’t believe that, except by happy accident, it is), our situation demands immediate action.  So we need to act, but to act in the knowledge that we’ll need to learn from what we do and what it accomplishes (and doesn’t),  then act again… and learn again…  and act again… and so on– always steering toward that balance.  Responses to pickles like the one we’re in are necessarily dynamic and heuristic; they are opportunities to learn, in this case to “learn our way” through the twin challenges of deflation and inflation back to the relative calm of development and growth.

In navigating our way out of these economic eddies, then, as in so many things, the best guiding metaphor may be surfing: shifting around carefully but purposefully to find that stance, that posture– that balance– that’s poised between falling backwards and falling forwards, even as it propels us on a powerful ride.

There’s no secret to balance. You just have to feel the waves.

It may not be as easy as Frank Herbert suggests; but surely he’s got the right idea.  So now, Dear Readers, into the waves– surfs up!