Back in February I wrote about the film There Will Be Blood, which subsequently brought a best-actor Oscar to its star. While Daniel Day-Lewis had increased fortune and fame in his immediate future, the rest of us got dramatically increased oil prices in ours. We also got climbing food costs. And millions got mortgage foreclosures. For these folks, the first half of 2008 has been a perfect economic storm.
When will it end? Well, maybe it wont. Three weeks ago, while on business in Washington, I read these observations by commentator Steven Pearlstein in the Post: The tendency is to see these as separate developments, each with its own causes and dynamic. Fundamentally, however, they are all part of the same storythe story of the global economy purging itself of large and unsustainable imbalances that for a time allowed many American to think they were richer than they really are.
Pearlstein continued, The thing to remember is that its not just residential real estate. The same factors that were behind the housing bubble were also at work, to varying degrees, in the auto bubble, the commercial real estate bubble, the travel bubble, the college tuition bubble, the retail bubble, the Web 2.0 bubble and most recently the commodities bubble.
He concludes with this sobering thought: Is this the end of the world? For the richest country on the planet, certainly not. But it does represent the end of a decade or more during which Americans were permitted and even encouraged by the rest of the worldand by their own leadersto live way beyond their means. For the first time since the early 1980s, Americans will have several years of uncomfortably slow growth and uncomfortably high inflation as the US economy regains its balance and creates a foundation for more solid and sustainable growth.
As gloomy as Pearlsteins prediction may be, I fear it may be overly optimistic. Not only the US economy is seeking a new balance. The global economy is doing the same thing. Standards of living in the so-called developing nations are rising. China and India are growing by leaps. The same may be said for the nations of the European Union. Historically impoverished countries, such as Ireland, have enjoyed unprecedented growth inside the EU. Several South American countries, notably Brazil, are also on growth trajectories.
As an oil-dependant nation, America is competing with all these other regions for petroleum in a global marketplace where this vital commodity is destined to become ever more scarce as the 21st century marches forward. As the cover of National Geographic screamed almost four years ago, The End of Cheap Oil. The magazine sure got that right.
Food prices arent going anywhere but up in the long haul either. There are many reasons why: diversion of corn to ethanol production ever-increasing world population demand by millions of new members of the middle class in India, China and nearly everywhere else for meat, fish and other foods their parents could only devoir in their dreams shrinking farmlands in the face of suburban sprawl.
Presidential-hopeful Obama insulted many small-town Pennsylvanians by speaking of their bitterness about lost jobs. Bruce Springsteen beat Barack to the punch by almost 25 years, when he wrote the lyrics for My Hometown on his Born in the USA album: Foreman says these jobs are going boys and they aint coming back. The Democratic candidates caustic comments only confirmed what the Boss predicted.
As if all this were not enough, some even add that IQs in the developed West perhaps have peaked, while they will do nothing but climb in the developing world, as its people take advantage of the same cultural factors that drove IQ increases in America and Europe during the past 100 years or so. Time will tell. For now, suffice to say that, while the high tech revolution is probably eliminating jobs faster than it is creating new ones, there are signs, says reporter Andrew Anthony of Englands Guardian newspaper, that [IQ growth] is coming to an end, at least in western Europe. Recent studies in Scandinavia show a plateau in results, and a drop in arithmetic.
If the world economy is finding its equilibrium, our side of the seesaw will move down as the other guys side lifts off the ground. We wont be going back up. Heres hoping we dont bloody our big butts at the bottom.
Jim Castagnera is associate provost and associate counsel at Rider University in Lawrenceville, N.J.
From The Progressive Populist, August 15, 2008
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