Or... how a brief economic history informs our current economic situation
To be clear, I am a free-market, capitalist and believe very strongly that the market knows better than any government could. However, a few things have transpired that concern me greatly, and should bring pause to others:
[1] In response to the banking failures of 1929, two acts of Congress came to pass: the Glass-Steagall Act and Banking Act of 1935, which prohibited banks from investing and limited interest rates among other things.
In March of 1980, Regulation Q (from that time period) was repealed. The "Savings & Loan Crisis" ensued. (Ronald Reagan was president.)
[2] In 1999, other provisions prohibiting bank holding companies from owning other financial companies were repealed. Robert Kuttner (co-founder The American Prospect) has criticized the repeal of the Glass-Steagall Act as contributing to the 2007 subprime mortgage financial crisis. (In 1999, Bill Clinton was president.)
[3] The Bretton-Woods system of 1944 provided that the United States would maintain the dollar value of gold at $35 and the other national central banks would maintain the dollar value of their currencies. If all countries were fixed to the dollar and the dollar was fixed to gold, the fixed exchange-rate system was anchored to gold, a design that prevented monetary inflation.
In 1973 the Bretton Woods Agreement was effectively disbanded and gold increased to $140 an ounce. Inflation became rampant and in fact, stagflation (recession and inflation - the worst of both worlds) came into being. (Richard Nixon was president.)
[4] In 1944, the Bretton Woods Agreements took the U.S. Dollar off the gold standard. A major cause of oil (and gold) inflation has to do with the precipitously falling dollar - due in no small part on how our U.S. economy has been led (read Government spending). Or mis-led. By both democrats and republicans alike.
[5] In the strong economy of the 1950s and 1960s, we had utilities who were encouraged to find ever-more profitable ways to reduce energy costs. Passing a portion on to consumers while being allowed to keep some of it (in case we forget, they are called profits.). Now we seem to discourage this behavior. Since the 1973 oil embargo, we have viewed oil companies as the bad guys, and taxed their "excess" profits. The unintended consequence of this is that they did not invest as they could have, ramping up our dependence on foreign oil resulting in much higher gas prices.
[6] In the strong economy of the 1950s and 1960s we had smaller budget deficits, Republicans weren't in cahoots with Democrats (in spending our hard-earned $s), nor were they spending on hundred-million $ bridges to nowhere. Or multi-billion $s no-exit-strategy wars.
[7] In the strong economy of the 1950s and 1960s, utilities were rock-solid. Banks were rock-solid. Inflation was tamed. The United States led the world financially and morally. In ethical behavior. In Doing What Is Right.
[8] Outsourcing: From a business perspective, it "seemed" like a good idea to export our jobs to lower-wage (read lower-quality / lower-ethic) countries. But with contaminated pet food, lead in toys and counterfeit software and other products, we are finally waking up to the fact that not everyone has the same ethics as Americans.
[9] BRIC: Brazil, Russia, India and China are growing at such a rate that their economies are (also) driving up oil prices.
[10] Obesity and being a victim: Americans seem to feel the Government owes them a living. Including free health care. Which will require vast sums of money and cause further erosion in the value of the dollar. The deferred gratification that comes with longer life (later) due to better behavior (now) seems to be a difficult concept to grasp for most Americans.
If you put all these seemingly disparate facts / events together, one can see how this came about: Death by a thousand cuts: Those cuts being the erosion of profit as a true motivator (led by anti-capitalists), and one can see where this may head. Sooner than later. It is interesting that this contrarian view makes sense when unwinding unintended consequences caused by too much government meddling.
(Side note: Portland is a microcosm of this mismanagement: We are spending precious time and resources on naming streets and building bike paths instead of creating an environment where clean, sustainable businesses are encouraged to set up shop - to bring in a net in-flow of people to the community. Instead, we tax businesses and investors and only realize the unintended consequences after many move out.)
We have a choice in front of us. We have the talent, resources, capitalist (read free-choice) system and capability to lead the world: economically, technologically, politically and even morally.
Rearranging deck chairs on the Titanic seems to be the status quo from our political leaders. Voted in by a disenfranchised electorate.
The United States deserves more. Its citizens deserve more. And you deserve more.
We need leadership. We need focus. And we need to marshal our collective will and considerable resources to work together to solve all these problems, in a way that bodes well for our children and grandchildren.
Instead of the political parties trying to undermine one another, instead of the PUC disincentivizing utilities to find innovative ways to move to clean energy, instead of additionally taxing oil companies' profits - why not focus on what would solve many problems?
Why not focus our resources on incentivizing, supporting and even funding renewable energy technologies that would enable the United States to become a net-exporter of renewable energy? Not high-jobs-per-kilowatt-hour. But high-density, clean energy production.
A simple (simplistic?) solution is to move away from oil entirely and rely on electric vehicles, using renewable grid-electricity production. Yes, driving range is an issue. As is battery technology, but most of us drive fewer than the average range of current-technology plug-in cars. By converting even 10% to 20% of vehicle usage to electric vehicles, greenhouse emissions would decrease significantly, as would oil prices. These are business decisions, and it seems our car companies are a bit slow in "getting it".
Bottom line: The root cause of our economic problems is that we are a net importer - of goods and energy. No economy can withstand the hundreds of billions of dollars being sent to non-friendly states. The root cause of us being a net-importer is that in general, we are complacent. Yes lots of great people and organizations are doing lots of great things. But America appears to be in not only a cyclical decline but a long-term decline.
Solution:
As a free country (so far), you have the ability to vote with your signature and your dollar.
Government: Let's help Government become more responsible by only voting for those who "get" this notion and actually do something by focusing on the root cause problem: Becoming a net-exporter of renewable energy and renewable energy technologies. How do we do that? With your vote. In 1980, John Anderson ran on a ticket to solve our energy problems by adding a 50 cent per gallon gasoline tax. Had this been accomplished, those billions of dollars would have been spent to solve our oil dependency. He received 7% of the popular vote. Use your signature on a letter to your congressmen and women - to fund renewable energy technology development. Your children will thank you.
Business: Only buy cars that are electric or hybrid. That is, vote with your dollars. Use your signature to write the CEOs of U.S. car manufacturers to build plug-in electrics. Then buy them.
Labels: Make a Difference, Political Action, Political Inaction, Unintended Consequences
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