12 Most Revealing Reasons We’re in this Economic Slump and What to do about it

12 Most Revealing Reasons We’re in this Economic Slump and What to do about it

When the financial markets imploded in 2007, the experts predicted a massive bailout would turn the economy around, since the banks would have money to lend again. They thought US housing prices would soon hit bottom and rebound. Last time I checked they’re still falling in many areas. Same with unemployment: it’s stubbornly hovering at painfully high levels. There’s nothing like a little perspective to help you navigate tough times. While no expert on the matter, I’m always curious as to the deeper “why” we’re here question. Here’s where I’ve landed to date – feel free to add your perspective of course!

1. It’s not going to be fixed by a single guy in the White House

It’s funny how easy it is to stake the claim that you’ll do better at turning the economy around than the next guy. If only it were that simple. This is a problem that requires public, private and everyone in between to solve. We took time getting here and it’ll take time getting out of it. There are no easy answers.

2. We’re making the long slump longer

Focusing on cutting government spending rather than investing in technology, education and innovation – things that will position people to shift to the new types of jobs that will drive growth – we’re making the problem longer and worse. No one seems willing to publicly acknowledge and act on this.

3. This time we really are moving to a new economy

The Dotcom era was billed as the new economy. But THIS is the real new economy. The reality is that once stable white collar jobs aren’t. Technology has eliminated the need for so many that we’re moving to a service economy. Just as during the Great Depression we were moving from an Agricultural to Industrial Economy as advances in farm production caused prices to plummet and we no longer needed 1/3 of Americans working to produce the food on our tables. The jobs we’re losing are not coming back.

4. World War 2

The only thing that turned around the Great Depression was the massive investment by the Government in infrastructure for World War 2. It wasn’t the New Deal and it wasn’t the private sector that stimulated the economy. This spending moved the workforce from farms to Factories and broke fall according to economist Joseph Stiglitz who’s written extensively about our financial situation. So far we don’t have many in office promoting heavy spending on updating our infrastructure – roads, highways, etc. And I’m certainly not in favor of another war to turn it around this time.

5. 23 Million Americans

That is the number who’d like a full-time job but can’t get one. And state governments are laying off significant numbers of people from what used to be pretty darn stable jobs – to the tune of 700,000. While the unemployment rate might be hovering around 8.5%, the real unemployment rate – in Oregon at least – is 17%. This includes those who have either given up looking for work or have a part-time job but want full-time. Unemployment in the Great Depression was 25%.

6. We were supporting our lifestyle with debt

By 2007 the savings rate was near zero and we kept our lifestyles going with debt. And it may be less. Because the rich save a significant portion of their income for a rainy day, they skew it for the rest of us. Many are likely going negative. Not sustainable long term.

7. The banking system is broken

And it continues to stay that way. It operates without restrictions free to do what it feels best to enrich those at the top rather than serve society. They didn’t use the bailout to help the majority, and the immense wealth created by the bonuses and excessive compensation have disenfranchised most. When you have a company like MF Global which lost $1.2 billion of their customers’ money, how can you have faith your money’s safe anywhere. The small investor doesn’t have much of a chance.

8. We’re no longer the land of opportunity

If the last few years have taught us anything, it’s that the pursuit of the American Dream can be elusive. Our standard of living is lower than it used to be and not likely to change. It may be small comfort, but we still have a much higher standard than most of the world.

9. We won’t raise taxes on the 1%.

Warren Buffett talks about how taxes are not all bad and that he pays far less than most of his employees as a percentage – 17.67% versus the 30% most of us pay. This is far lower than any time in recent history and is not sustainable. He also argues that paying taxes hasn’t deterred the rich from investing in businesses. Cutting taxes is a nice platform to campaign on, but it doesn’t do anything to fix the economy. In fact it makes it far worse.

10. Bipartisanship bickering

The constant bickering by both parties distracts those we elect to represent us from doing any real work. If they cannot concede that anyone not in their party has a worthy idea or can offer support, how can government put in place the dramatic changes needed to turn the economy around? They can’t. The changes needed today aren’t easy and won’t please everyone. They require political leaders to set aside self-interest for ‘we the people’. Doesn’t seem likely anytime soon.

11. Real estate continues to explore the bottom

In 2008, 2009, 2010, 2011 and now 2012 the ‘experts’ predicted that real estate would/will hit bottom which means it would then start going back up. If this tells you anything, it’s that no one knows where the bottom is, or how long it will last. Until we fix #5, we’re not likely to see this change very quickly. In some areas of the country where manufacturing and service jobs are NEVER coming back, there may be no recovery. It’s part of the disruptive change that happens with a move to a new economy. Such areas need to completely reinvent themselves to rebound. Much like Oregon has had to do in transforming from a Timber to Technology state. (Many areas are still suffering).

12. A culture of fear

Everywhere you look, someone’s telling you to be afraid. Whether it’s terrorism, financial or environmental doom, someone’s predicting the next disaster. Fear is what makes the media money. It captures your eyeballs and companies bank on your fear driving purchase decisions. I recently read how we’ve transformed into a national security state driven by ever increasing secrecy and security. Problem is, I bet you feel less and less secure. And more fearful. While, yes, a lot of bad stuff is happening all around us, allowing that to run your life prevents you from doing the work that matters to yourself and society.

As a business professional, what do you do? If you’re waiting for this to blow over, you’ll be waiting a LONG time. There’s a lot of wealth to be made in a downturn. Wealth that can also do social good. You have to retool your thinking. You have to take action. Invest in the things you and your business need to compete in a new reality. This is going to be messy. Many more people are going to be hurt just as they were 80 years ago during the Great Depression.

You cannot control the weather or the economy no matter hard you try. What you can control is your response. Do you let these forces paralyze you or acknowledge that yes, things are less than ideal, but seek out the good and find a way to thrive no matter what?

Featured image courtesy of epSos.de via Creative Commons.

Patrick Prothe

http://www.patrickprothe.com

Patrick Prothe is a marketing and social strategist leading teams focused on creating wow and delight in B2B technology. He gets excited about connecting dots and people. To fuel his creative drive he is an entrepreneur photographer currently working on a book on Oregon's historic coastal bridges.

468 ad
14 comments
dbvickery
dbvickery

Patrick, every one of your points resonates! We give too much credit/blame to one guy, we have bipartisan bickering and posturing, and we live in a society where the sense of entitlement means we have to support our lifestyles with debt.

I love the US. I love my life, my freedoms and the abundant opportunity here in the good ole USA. But our greed, followed by our neediness when we over-leverage, astounds me.

Brandon Christian
Brandon Christian

I think #6 is the biggest one. But the interesting thing is because we live lifestyles of debt and credit we haven't had the motivation to change because we haven't fully felt the impact of our economy because we can continue to spend money we don't have. The government spending money we don't have and the banks loaning money the don't have is also a big problem.

I do, however, feel if we don't change our foreign policy we are looking at the possibility of #4. With China, Russia, England and the U.S. all building up troops outside of Iran we are looking at a possible WWIII.

amberrisme
amberrisme

#1 #9 and #12 are the biggies, in my opinion. These things also come with even darker consequences than just economic struggle.

BruceSallan
BruceSallan

I take issue with #1. OUR President has done more damage in 3 years than any president in history. Of course it's not an easy fix, but trying to make us Europe is crazy. Does ANYONE want to be in the sinkhole that is Europe? Yet, that is the ideal for our president and his cronies!

PegFitzpatrick
PegFitzpatrick moderator

Really interesting, this is especially sad "Everywhere you look, someone’s telling you to be afraid. Whether it’s terrorism, financial or environmental doom, someone’s predicting the next disaster. Fear is what makes the media money" as we have gone from the American Dream to the American Nightmare. Lots to think about!

BrandFlair
BrandFlair

You lost me at #9. The 1% argument is actually pretty weak in my opinion. One of the biggest issues is small businesses staying on the sidelines because they cannot plan for the short to medium term. They have no idea how to plan for government programs like Obamacare and are afraid to hire. Taxes are too high on our businesses and capital gains should be taken to zero.As for your other points: I agree that the lifestyle is spend what you do not have whether it is public or private money. Also agree that one person in the White House won't fix things but the current resident does not have a clue and is in way over his head (and frankly has no experience to justify him being there). Not that the other option in 2008 was better but we cannot afford another four years of Obama and (who I dislike way more) the people who advise him. I would love a new economy, just not one that is moving towards socialism and entitlement as a means to solve things. Think @Brucesallan would love to add to this discussion.

sharongreenthal
sharongreenthal

Thank you for saying this in a succinct and intelligent way. Everything you said makes perfect sense to me. I have reached the point where I can no longer listen to the news the way I used to, and I have lost a lot of the optimism that we all need to get this country growing again. I think our government is broken, and that is a huge problem. As a small business owner, I can tell you that things are improving for us a little bit at a time - but at the expense of jobs, most of which we won't be creating again any time soon.

pprothe
pprothe

@BruceSallan I think it's a pretty complicated problem a long time in the making, and there are no doubt many ways to look at this - and just as many opinions on who did what. I think it goes beyond one person and am certainly not trying to defend either side both are at fault and the bigger issue is that neither can seem to collaborate on a solution...

pprothe
pprothe

@PegFitzpatrick Exactly! I think there's usually two sides to a story and often our personal reality is what we create. We can make it worse or better depending on our approach and willingness to open our minds and dive in!

prosperitygal
prosperitygal

@BrandFlair@BruceSallan Why should they pay a less percentage of their income because they pay a bulk of the amount? How is that helpful to familes who make FAR less but still have to find ways to pay bills, and find a way to save when the cost of living exceeds their abilities after taxes take a much LARGER percentage of their income.

pprothe
pprothe

@sharongreenthal Thanks and glad to hear things are improving for you. Small business owners have it really tough - especially when it comes to healthcare and it's not getting any easier. Government is broken with no one seriously stepping up to create meaningful change. And I say that across the board . . .

sharongreenthal
sharongreenthal

@pprothe I'd have to say those health insurance premiums are pretty horrendous. I choke each month when I sign that check.

Adsense