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The Vicious Cycle
Ethan Smith
Origin name: Beart4toArlington, VARegistered User regular
Origin name: Beart4toArlington, VARegistered User regular
The bailout has brought a word back onto the lips of political scientists and economists everywhere—“Keynesianâ€. We’re trying to create a New Deal, we’re trying to find some way to avoid falling into a Great Depression while simultaneously keeping our economy competitive.
And yet we seem to be forgetting one of the most successful acts of the New Deal, we seem to be ignoring the one economic stimuli that changed our society the most. The GI Bill provided higher education to nearly all of the men of America, and in doing so took higher education from being a luxury of the rich to being a requirement to our society as a whole. This education increased social mobility to a massive degree, and in doing so introduced new ideas into the governing elite and has thusly kept us out of the massive boom bust cycle that America went through.
I personally believe that the reason that the American economy was so volatile and so influenced by the boom-burst cycle is because during the 19th century until the New Deal, we had a closed elite. The children of those in power were destined to gain their parents power because there was such a short supply of well educated individuals, and because society restricted the ability of a poor man or woman to go from rags to riches. This meant that every person with power, be it a general, a politician, or a businessman, had the same personal experience and thus brought the same common wisdom to their job. So, thusly, if this common wisdom was flawed, as the ideal of laissez faire was, it wouldn’t be offset by any competing ideal, thus meaning we kept all of our eggs in one basket.
Closing the people off from gaining significant power also contributed to monopolization--because the competent businessmen had such a small amount of competitors and few laws preventing a rise to power, you often had one person gaining control over multiple resources, which lead to Marxism’s assumption that, eventually, all of the capital in the world would come under the control of one businessman, which would signal the end of capitalism. This has not happened. Why?
Because both the poor of the 1st world and, now, increasingly, the comparatively rich of the 3rd world are able to compete with the old guard. If a business performs inefficiently, it might be bought out either by a new, better business or a foreign business. Ironically, this opening up of the elite to foreigners and commoners has lead to the spreading of the wealth Marx imagined--it is becoming increasingly hard for people to simply live off their parents riches without contributing to society.
But this is leading to the problem we have now. If our society is opening up the elite in such a way that, theoretically, anyone can go from a rags to riches story, why is it that we seem to be falling for such a massive bust?
What has happened is education has lost its societal prestige. The Reagan administration systematically dismantled both the laws that prevented monopolization and deflated the programs which allowed for an egalitarian market. This has been exacerbated by every president since. Since Reagan, the number of billionaires has increased 45-fold, while the rich-poor gap in the United States has grown to gargantuan levels. Without support for education, it is dismissed by many of the lower class as being a waste of time and money.
It’s easy when you’re a undeclared student who can’t afford the education they're going through to think that there’s no reason to continue on with it. However it is intensely difficult to get a job without higher education, and the lower classes fall into a vicious cycle in which they cannot afford for their children’s education, thus putting their children in a spot where they can’t afford their children’s education, and find it intensely hard to find a job because the supply for jobs to people without higher-education is too high, putting them in the opposite situation as someone born into an intensely affluent lifestyle. As our politicians of the last 20 years have actively worked to close the American Nobility off from those who aren’t born into a rich lifestyle, we fall increasingly back into a Gilded Age. We have already started to see the problems of the resurgence of the monopoly in the bailout. In a perfect capitalist society we would see smaller car companies come in to replace the Big Three, but because of our actions we have the options of throwing money at them and praying they change their business paradigm or letting foreign companies buy them out. If we don’t work to allow the American Dream to become a reality within our borders then we will, ironically, be overrun by countries where the American Dream does exist.
And yet we seem to be forgetting one of the most successful acts of the New Deal, we seem to be ignoring the one economic stimuli that changed our society the most. The GI Bill provided higher education to nearly all of the men of America, and in doing so took higher education from being a luxury of the rich to being a requirement to our society as a whole. This education increased social mobility to a massive degree, and in doing so introduced new ideas into the governing elite and has thusly kept us out of the massive boom bust cycle that America went through.
I personally believe that the reason that the American economy was so volatile and so influenced by the boom-burst cycle is because during the 19th century until the New Deal, we had a closed elite. The children of those in power were destined to gain their parents power because there was such a short supply of well educated individuals, and because society restricted the ability of a poor man or woman to go from rags to riches. This meant that every person with power, be it a general, a politician, or a businessman, had the same personal experience and thus brought the same common wisdom to their job. So, thusly, if this common wisdom was flawed, as the ideal of laissez faire was, it wouldn’t be offset by any competing ideal, thus meaning we kept all of our eggs in one basket.
Closing the people off from gaining significant power also contributed to monopolization--because the competent businessmen had such a small amount of competitors and few laws preventing a rise to power, you often had one person gaining control over multiple resources, which lead to Marxism’s assumption that, eventually, all of the capital in the world would come under the control of one businessman, which would signal the end of capitalism. This has not happened. Why?
Because both the poor of the 1st world and, now, increasingly, the comparatively rich of the 3rd world are able to compete with the old guard. If a business performs inefficiently, it might be bought out either by a new, better business or a foreign business. Ironically, this opening up of the elite to foreigners and commoners has lead to the spreading of the wealth Marx imagined--it is becoming increasingly hard for people to simply live off their parents riches without contributing to society.
But this is leading to the problem we have now. If our society is opening up the elite in such a way that, theoretically, anyone can go from a rags to riches story, why is it that we seem to be falling for such a massive bust?
What has happened is education has lost its societal prestige. The Reagan administration systematically dismantled both the laws that prevented monopolization and deflated the programs which allowed for an egalitarian market. This has been exacerbated by every president since. Since Reagan, the number of billionaires has increased 45-fold, while the rich-poor gap in the United States has grown to gargantuan levels. Without support for education, it is dismissed by many of the lower class as being a waste of time and money.
It’s easy when you’re a undeclared student who can’t afford the education they're going through to think that there’s no reason to continue on with it. However it is intensely difficult to get a job without higher education, and the lower classes fall into a vicious cycle in which they cannot afford for their children’s education, thus putting their children in a spot where they can’t afford their children’s education, and find it intensely hard to find a job because the supply for jobs to people without higher-education is too high, putting them in the opposite situation as someone born into an intensely affluent lifestyle. As our politicians of the last 20 years have actively worked to close the American Nobility off from those who aren’t born into a rich lifestyle, we fall increasingly back into a Gilded Age. We have already started to see the problems of the resurgence of the monopoly in the bailout. In a perfect capitalist society we would see smaller car companies come in to replace the Big Three, but because of our actions we have the options of throwing money at them and praying they change their business paradigm or letting foreign companies buy them out. If we don’t work to allow the American Dream to become a reality within our borders then we will, ironically, be overrun by countries where the American Dream does exist.
Ethan Smith on
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Count me as skeptical that a more volatile class structure leads to a less volatile market. Count me as especially skeptical that our present recession can be attributed in any way to American attitudes towards education. Broadly shared prosperity and educational opportunity for all are good things in their own right, but I have a hard time seeing them being the answer to boom/bust. The best solution to that problem is to eliminate the conditions that create bubbles, perhaps by robust taxation.
The lack of social mobility I believe is more due to globalization and the fall of communism. Globalization because cheaper foreign labor has pushed down wages for the middle class while at the same time making record profits for the upper class. With the fall of communism creating a situation where Free Market capitalism was seen to have no competition.
So there's no need to give the poor or middle class any scraps because there is seen as being no alternative then the present system. It's a what can they do it's the only game in town kinda of thing.
This. I've said this before but I'll repeat it. The base of the U.S. financial regulations were mostly put into place with the New Deal in a pre-WWII economy. Since then, yes, things have been added on, but they have been little more than Band-Aids. The regulations we have weren't designed for the type of economy we have now. It's like building a hut on top of wooden stilts as the foundation, then you keep building the house up without actually fixing or replacing the foundation. Eventually you have an enormous concrete skyscraper that's still being supported by wooden stilts, and it's going to collapse under it's own weight without a fundamental change in the foundation holding it up.
There are of course other problems. Keynesian economics, while they look okay on paper, don't hold up in the long term in practice. They act best only in times of crisis. This was another problem. The Keynesian model was essential put in with the New Deal and never got taken away, so you wind up with a volatile economy that eventually goes completely out of control.
You also have a major problem with the way business itself is simply run. Most major businesses don't look at the profit they make in a specific quarter, but rather compare to the profit made in the last quarter or the quarter the year before. Even if they still make a profit, if the charts don't show a consistent increase in profit, execs and economists tend to panic.
The lack of fiscal discipline is the problem, not the notion of counter-cyclical spending.
But yeah I agree with everything in your OP.
Let us say I run a company. Lets call it Brand X. I can build a factory anywhere in the world, and because I am building a new, ultramodern factory with the newest and best practices I am going to need workers educated enough to understand those practices. Where do I build my country?
Right now there are companies that would love to build factories in America. Unfortunately for some the unions prevent their construction. Unfortunately for others the workers they would expect to employ do not have a sufficient education to do the jobs.
We either need to get competitive yesterday, or fall behind. Our high school graduates/drop outs are competing with the worlds high school graduates/drop outs if someone, somewhere can do your job for 10 cents an hour then that is who your competing with. When the time comes that we have to compete on the global stage I expect the lower and middle classes to suffer the most. Right now at least the world has a bit of a vested interest in keeping us afloat.
Arguably the deregulation of the last 10 years was a fundamental change in the foundation. The problem isn't the regulatory structure, it's the fact that we basically dismantled it.
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You build your company in the country with the most favorable tax structure, of course. Workers can be imported and/or trained, but laws are immutable.
I agree that education is exceedingly important and the way we've let ourselves slip is eventually going to bite us in the ass. But it's not because we desperately need more construction workers with college degrees--we need to increase the ranks of the entrepreneur class, the people who go out and start companies on the basis of a bright new idea. They're the ones who are going to drive our economy, and the best way to find, train, and encourage them is to educate our citizenry well.
Not if you have lobbyists they aren't, :winky:.
Tax structure or no, if you have country X with a favorable tax structure but you cannot find the workers you need, and country Y with a less favorable tax structure but has a surplus of workers you are going with country Y.
Keep in mind here, when I refer to needing people with a certain level of education I am talking 100% about high school graduates. We are not discussing college students, because these jobs are not offering college graduate wages. While we might end up with college graduates doing the work for whatever reason the primary focus here is that we are moving toward high tech semi skilled labor and the quality of education our children are receiving is insufficient. On the job training is not an option. Which means these jobs are going to go to areas where workers can be found, and our workers are going to have to compete with unskilled labor and demand 10x the wages.
What makes you think the quality of education is declining?
We stopped leaving children behind.
Well, I guess that is just as foggy as the link drawn between membership in the elite and the business cycle.
I generally prefer things a bit clearer.
That's rather ironic, because the reason education is far worse nowadays is because it is explicitly for the purpose of teaching kids job skills. Why else would rote memorization be so often required? Memorization is the best skill that a white collar worker can have.
The problem is memorization does not teach people how to think. We are going to need workers who can think on their feet, and problem solve. If all you can do is memorize a task, be prepared to be competing with 10 dollar a month workers. Which leads to the problem of how exactly does an American worker compete with that?
well, assuming the rate of GDP is increasing faster than government debt, then it's pretty much okay to run a deficit.