Rebuild or Redesign?

      6 min read     

Hey, did you hear our economy is collapsing? Oh, what’s that, you haven’t heard anything BUT that?

I figured it’s high time for a little bandwagon jumping. Everyone on the web has an opinion, so I’m not going to be left out. But I’m going to start with one stipulation. I contend, and I would hope you’d agree, that nobody really knows how the global economy works. Sure, there are lots of theories, and everyone’s got a favorite. But nobody knows for sure. If they did, they’d be king of the world, and we wouldn’t be in this mess. There would be no endless arguments in Congress over how to fix this mess - we’d just fix it. So, given that stipulation, I feel as well-qualified to comment on this whole mess as anyone.

First, a couple of comments on how we got here. I would hope that we can finally put to rest this blind belief that somehow free markets work wonderfully if left to their own devices. While I believe that most people behave ethically and are not driven by overwhelming greed, some people are. I think the current mess shows us that even a few of those people can wreak havoc on a system. Even now, while we’re in the midst of the mess they created, many of those people  refuse to take any responsibility for their actions. And this doesn’t just go for the big corporation CEOs. This problem happens at ground level in our communities. I recently observed an online discussion in which one small town Wisconsin banker made this remark: “Yes, we made sub-prime loans. But we never made one of those loans unless we knew we had a buyer for the mortgage. And it didn’t matter how bad the loan risk was, there was always a buyer.” Throughout the discussion that followed, no one pointed out to the banker that he played a direct role in this collapse. This banker knew the loans were a bad risk. But he knew he could make the loan and sell it at a profit, thereby making it someone else’s problem when the payee defaulted. That to me is simply unethical business, no better than any pyramid scheme - you’re trying to take your profit and run before the scheme collapses. We need people in business to understand that for business to be ethical and sustainable, deals have to provide some benefit for all involved.

Now, on to post-bailout behavior, especially by the financial industry. Pages and pages have been written about this, and it’s still not enough to fully cover the stupidity exhibited by many managers. Employee bonuses?!?! A true free-market operation would not issue employee bonuses when your business is millions or billions of dollars in the red. When the American people are issuing public monies to bail an operation out, they have a right to  insist on responsible use of those monies. Any CEO who doesn’t understand this, and thinks it’s still okay to go ahead with employee junkets and other rewards is really too stupid to remain in their post.

Finally, a few thoughts on how the bailout money is being used. I think spending on infrastructure is a good move. It will create jobs, and our infrastructure is in desperate need of some boosting. I think money spent to keep the credit markets moving is necessary. I’m disappointed by the grandstanding of Republicans who, after 8 years of drunken spending, now claim to be defenders of future generations. I’m hopeful, but reserving judgement, on President Obama’s oversight of new bailout money.

Overall though, I’m very disappointed that there’s not a larger, more intelligent conversation about what’s happening. We’re frantically standing with our finger in the dike while throwing piles of whatever we can grab onto the dike in hopes of shoring it up. At the same time we’re ignoring the fact that perhaps the dike is no longer capable of functioning. We’re ignoring a need to make changes in course. Central to all of these bailouts is the belief that certain companies are “too big to fail.” And I think, given how our current economy is structured, that perhaps some of them are. But I think given today’s realities, that’s a stupid place to be. We leave our economy vulnerable to collapse with companies that large. It’s not only a financial security problem, it’s a national security problem. We’re like a small town whose largest employer employs 80% of the town. That town will do whatever they have to do to keep  the employer happy. And at some point in the future when the company decides it’s done with the town, the town collapses.

So the question for me becomes, why are we leaving ourselves in this predicament? I think it’s foolish on the micro, or community level, to be in a position of dependence on one company, or one resource. It’s nothing short of ludicrous to do it on the macro, or national level. And since we’re going through a period where those “too big to fail” structures are collapsing, isn’t this the perfect opportunity to redesign an economy without those weaknesses? I fear our current bailout approach is simply to rebuild something that we know will fail.

How do we redesign our economy to be more robust and secure in the future? I’ve got a couple of ideas. First, I think we need to put much more focus on small business and entrepreneurship. People currently getting laid off from large companies are perfect candidates to start a new business. They just need good support from their community and their government. To that end, one of our greatest weaknesses is lack of health care. Here again, our whole system is based on going to work for a bigger company to get a good health care plan. If small businesses and entrepreneurs didn’t have to worry about health care, I believe we’d see a huge boom in the number of businesses started. It’s time for universal health care, and I believe that has to come from the federal government.

With universal health care in place, it’s time to stop writing billion-dollar checks to big corporations. It makes much more sense to me to write 1,000 million-dollar checks and watch the 500 companies that grow and flourish from such an investment. Spend some of that bailout money pushing entrepreneurship education into our school systems. Over time we can build a start-up culture in this country that will stand us in much better stead as our world continues to change at an ever-more rapid pace.

Finally, I think there’s one other change that we need to perpetuate in our national psyche for all of this to work long-term. It’s a biggie, but I think it’s key. We have been conditioned to believe that growth is the ideal state. Companies who don’t grow, expand revenues, hire more people, are seen as failures, especially by stockholders. We have to understand a basic fact though. We live in a world of finite resources. Perpetual growth is not an option. We need to start understanding the concept of “enough.” Note that halting growth is not the same thing as halting progress. Things will change over time. Some change is good, some is bad. Change will be a constant, and that’s a good thing. But growth does not have to be a constant, in fact it cannot be. We need to make that adjustment for our own survival.

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