Saturday, March 7, 2009

"A Vast Remaking"

So Sayeth the New York Times.

The summary of the article can be basically expressed as this in the layman's sense:
“These jobs aren’t coming back,” said John E. Silvia, chief economist at Wachovia in Charlotte, N.C. “A lot of production either isn’t going to happen at all, or it’s going to happen somewhere other than the United States. There are going to be fewer stores, fewer factories, fewer financial services operations. Firms are making strategic decisions that they don’t want to be in their businesses.”

Or, this in the slightly more technical sense:
For decades, the government has reacted to downturns by handing out temporary unemployment insurance checks, relying upon the resumption of economic growth to restore the jobs lost. This time, the government needs to place a greater emphasis on retraining workers for other careers, these economists say.

Basically, the idea is that the crisis is exposing a lot of major cracks in how the American economy has been working over the past several decades, and there ain't no more Internet-Real Estate Bubble-Caulk to pretend the holes aren't there anymore. We fundamentally produced wrong: we are too focused on building new homes, new cars, and selling financial services. So now the recession is showing how weak we are, we need to reallocate our workers and our resources to other industries to get our economy on sounder footing.

To some extent, yes. The bigger issue isn't just what we produce, though, it's how we consume. Our savings rate has steadily been declining, and people have been taking on greater and greater debt loads to increase their own personal consumption. We wouldn't be building so many houses and so many cars if people actually saved more money instead of spending: they wouldn't be able to afford such massive extravagances.

So, yes...while we have to retool our industries, we also need to be thinking about how to ratchet down our consumption, so we go back to an economy based on the sound principles of productivity, capital, hard work, and growth.

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