The 500 lb. Gorilla is referenced by the split that exists between political rhetoric coming from our privileged elite politicians and the truth that most Americans know. While the politicians are saying either we need more government spending or on the other hand, reduced government spending, the economic truth is we as a nation are divided by those that are at ease with their lifestyle or at unease depending on their status of income and employment. For the vast majority of us (say 80%), the past decade has seen their disposable income drop 7%, and their assets and home values drop by 10% in real terms.
For the top 20%, they have competed and thrived in an environment that has seen the fastest rise in less developed countries (LDC) in history. The truth is not about Galbraith’s type of increased debt spending or Tea Party decrease in debt spending, but about competing with countries that are hungry to enjoy the fruits of economic growth and the comforts they bring. Our debt will naturally decline if we grow (assuming our political elite change their past profligate ways), and will naturally increase if we do not grow. Does anyone really believe government spending will decrease? If so, call 1-800-IMA-IDIOT.
Developed nations that are not in this predicament either have raw material wealth (Norway) or have an ‘uber’ competitive culture and have invested in technology and innovation (Germany). Americans have been able to remain comfortable, until the 2009 recession because of our entrenched wealth. However, this recession is the first time America has seen a transfer of assets between the LDC/competitive nations and the complacent developed nations. That truth cannot be denied.
In America, we have seen unemployment rise to 10% and businesses shed jobs at the fastest rates in decades. They shed those jobs because their gross sales dropped and to remain competitive they reduced their work force, facilities, and management. Large multinational corporations will survive because they are world wide institutions that gain from the rise of LDC’s.
To increase our worldwide competitiveness, the American engine of growth (small business) must change, for currently the impact has been disastrous. Previously, small business would grow with new capital and increasing service business. Now that those two areas have shrunk, there is no place to go. Without this engine, America’s economic growth will continue to decrease until our level of competitiveness balances with the new economies. That means our living standards will decrease and that 80% will be extremely disillusioned and bitter (not good in a democracy). This is not a given event, but is probable based on several indicators.
The first indicator is the ultimate creep of resources from small business to government. In the past three years while businesses have lain off many competitive private employees, our answer to our problems has been to increase public employment and pay for it with increased property, sales, and future personal income taxes (hoping the same past response will change the answer). The result is that real productivity is decreasing. This doesn’t show in government statistics because there is no way of truthfully measuring government productivity and therefore it is not accounted for because replacing private employees with public employees earning wages and benefits 70% higher must decrease our competitiveness. This factor compounds the greatest issue regarding increased competition between unequal nations.
The real 500 lb. gorilla is this complex truth that all developed nations face. For America, who doesn’t have increased raw resources or have a majority of citizens that are well educated and culturally developed to be competitive, the future is to be written. How our political elite understand and integrate this is beyond my pay level and I guarantee that if I attempted an answer, there would be more people to disprove than to approve. Therefore, I will leave that answer to my astute readers!