I wrote this eighteen months ago, when this economic recession was just getting started. I looked at it again tonight and found nothing in it that I wanted to change. I have more to say on the subject of a long recession, perhaps a depression, but this is a very good place to begin to look for optimistic portents. –GSS
Hope and despair at the onset of economic recession: Who cares about the tunnel? All I can see is the light…
I don’t do well in despair.
Clarify that. I don’t mean that, when I find myself in despair, I fare especially badly.
What is mean is, if despair were a classroom discipline for which one could be tested and graded, I would probably flunk out.
I’ve lived through some ugly stuff in my life — who hasn’t? — but mostly I didn’t notice. I’m good at thinking — or so I like to think. And, good at it or not, I really do like to think. But I can only think about one thing at a time. For most of my time, for most of my life, I like to think about work. I like to think about what I’m doing. I like to think about what I’m getting done.
That doesn’t leave much room in my mind for despair. Or depression. Or gloom or sadness or fear or doubt or pain or worry or any of the things that people talk about when they’re not talking about work. I know about those ideas, much as I know about ideas like schadenfreude or universal guilt, things that I’ve heard about or read about but never seen from the inside.
You could say that’s my good luck, I suppose, but I’m sure it’s a choice on my part. Who hasn’t known sadness, after all? It’s not that I’ve never lived with painful emotions, it’s simply that I choose not to live with them any longer than I have to — which almost always turns out to be no time at all. I turn to my work not to escape from pain, nor even to work to alleviate it. I turn to my work because that’s what I love most in my life — and my purpose in living is to love my life.
But I come up short, I think, because I’m so badly equipped to prepare for desperate times. We’re headed into an economic recession, perhaps a depression, and I truly don’t know what to think about it. I’ve lived through several of these episodes in the past, and I worked right through all of them and didn’t notice a thing. It was all just newspaper noise to me, and not really even much of that. News — other people’s business — is a stimulant you use to excite your mind when it’s not busy enough.
And yet, and yet, and yet…
I’m willing to concede that I might look at the world through rose-colored glasses if you are willing to concede that my way of seeing the world is simply better. That, whether my way of tilting at the clouds of gloom may be in some way incorrect — according to some imaginary arbiter — nevertheless my way is the way that things get done. It’s always raining somewhere, but if you have time enough to care, you’re not working hard enough.
So: Consider this: The Federal Reserve Bank has been pumping paper money into the American economy since 9/11. Before then, really — since the dot.com bomb. This is actual inflation — what inflation actually means — the inflation of the supply of currency. Your whole life you’ve been taught — by newspapers — to regard inflation as price inflation, but this is a secondary consequence. The quantity of currency is increased — actual inflation — and thus there are more dollars chasing the same quantity of goods, in turn causing prices to rise.
Here’s my question: Since we’ve got a good head of steam going on the currency inflation engine — most especially in the past few months — where is the corresponding price inflation?
Gold is up by double or triple, as are some other basic commodities. Oil, real estate and securities have been all over the map. But everyday stuff is still pretty cheap. The “market basket of goods and services” is probably useless, by now, as a measure of price inflation. But we haven’t seen anything like the kind of price inflation we have every right to expect, given our ten-plus year orgy of currency inflation.
What gives?
Here’s what: The idea of price inflation presumes that, as the quantity of currency increases, the quantity of goods — and the demand for those goods — will remain stable. When that happens, prices have to go up. Economics 101. But what happens if the quantity of goods is also going up dramatically? What happens if the cost of bringing those goods to market is going down — in some cases plummeting?
Generals are always fighting the last war and economists are always making devastatingly logical predictions about the last recession.
What’s different this time? Data-processing, for one major thing. An industrial revolution in China, for another. An intellectual blossoming like manna from the heavens in India. The world is a much richer place than it was 15 years ago — before the internet changed everything.
Everything that is touched in any way by the data-processing economy is better, cheaper, faster than it has ever been before. We have come so far so fast that we have grown blithely accustomed to getting many, many services of incomparable value for free.
Do you doubt me? What would you have had to pay, in 1993, for the research you do casually today, at no cost — often on a whim! — at Google.com? You are submerged to unfathomable depths in wealth uncounted and all you can do is whimper about your poverty!
Ah, but it’s not the same, is it? You can’t eat a free Google search or a free Rhapsody tune or a a free episode of South Park with all the potty-mouth words unbowdlerized. But you can find love for free in dozens of places on the nets. And you can make friends for free at MySpace and Facebook. And you can network your way into a better job, for free, in your spare time, at LinkedIn. None of those are immediately edible, either, but man does not live by bread alone.
But that’s still not enough, is it? The newspaper noise is despair unbounded, despair unleashed, despair and gloom and doom unending, unrelenting, unforgiving, unsparing and unstoppable. All that and you still have an appetite!
Fine. Let’s talk about what is — the world we can see and feel and smell and touch — and not the horrifying specters that haunt our fears.
First, the productive capacity of the world has not changed. If anything, it continues to go up, even if perhaps at a temporarily slower pace. Wealth is not money. Wealth is goods and the intellect and husbandry and manufacturing capacity to produce more goods. Every bit of the real wealth we had yesterday, we have today. A lot of people have lost a lot of money, but our store of produced goods and our fixed capital base for producing more goods is undiminished.
Do you understand? If there had been a war, and if some significant fraction of the world’s capacity for producing goods and services had been destroyed, that would be a very bad thing. That would be a cause, going forward, for concerns about systemic poverty.
This hasn’t happened. We are richer today than we have ever been, expressed in terms of our ability to produce goods and services, and — because of the spread of data-processing, because of the enterprise of the Chinese, and because of the intellectual renaissance in India — we will be quite a bit richer — by those same standards — as soon as tomorrow. I mean that literally: Tomorrow.
That’s the silver lining. Here’s the cloud: The government of the United States — and probably all of the governments it routinely bosses around — are about to set on an unprecedented course of actual wealth destruction. Remember, wealth is goods, not money. But if the federal government makes it unpalatable for very smart young people to seek careers in medicine, the supply of health care will go down just as demand for health care is soaring. Again, this is Economics 101, a class taught to everyone except presidential candidates.
Governments destroy wealth best with wars, but they destroy wealth with almost everything they do. Anything that a government does that makes it harder for an honest trader to either produce, purchase or sell a marketable good or service is a net destruction of wealth. Money is not wealth, but money is the seed stock of new wealth, so, by despoiling the currency, by taxing productivity, and by rewarding stupidity, waste and sloth at the expense of wisdom, thrift and enterprise, governments systemically destroy wealth. This is all painfully obvious — by which I mean, the less obvious is it to you, the greater your pain.
Even so, it almost doesn’t matter. The Federal Reserve Bank had to despoil the American dollar for eleven years before it could bring on this recession, and, in the end, it required a lot of extra-especially-stupid intervention from other branches of the government to bring the economy to its knees. Just exactly how strong is the Atlas that is our semi-sorta-free enterprise system? Almost strong enough to bear the nearly infinite weight of ignorance of the American government.
But wait. There’s more.
In 1961, President John F. Kennedy promised to put a man on the moon in ten years. Not to say anything nice about a government boondoggle, but they actually got the job done in seven years. And then, the Federal government being what it is, Congress promptly cut the budget for everything associated with space exploration.
Was this a depression? Only if you worked in the aerospace industry. But a whole lot of people who had had a whole lot of grounding in data-processing and micro-electronics suddenly had a lot of time on their hands and a huge need to come up with ways of feeding their families.
The result? The birth of the electronics industry as you know it. Clunky digital calculators. Goofy digital watches with huge displays in ruby-red LEDs. And then smaller, cheaper calculators and incredibly cheap multi-function watches. And hand-held games and coin-operated games and game consoles. And micro-computers, first as do-it-yourself kludges and then as little desktop boxes like the TRS-80 and the Apple II. And then — the deluge…
All of this would have happened anyway, one way or another. But it happened the way it did because there was a “depression” among people who had been very well educated in electrical engineering and the computer sciences.
Fast forward to now. Since 1995 or so, people all over the world have been quietly improving their intellectual capital on the internet. Each one of them is pursuing his or her own interests, and each one is working at his or her own pace. But never in the history of human life on earth have so many people been so assiduously devoted to improving their minds. This is an amazing thing — and it has gone essentially unheralded. Like the priceless searches we take for granted on Google, the fact that everyone we know on-line is constantly getting smarter simply seems natural to us, by now. We are on the cusp of a real Athens, a global Agora where everyone can participate and it is so obvious to us that it’s hardly worth thinking about.
And yet all of us — not everyone in the world, but everyone in the wired world — is a part of this thing, and we’re all studying and reading and writing and learning and growing at a pace never once imagined by anyone on earth, not even the haughty Greeks of ancient Athens. They built an Agora for their elite, but we have spread the refinements of the elites to where anyone can take them up, if they choose. This just by itself is an amazing redistribution of intellectual capital that has come about right under our noses.
And all of us are wired a lot, perhaps a lot more than we might want to admit among strangers. But some of us are wired virtually all of the time. There is a subset of American young people, especially young males, for whom all the world takes second place to the internet. To the extent they work in the off-line world, it’s to pay for their time on-line. They may live with their folks or with roommates, but they live as cheaply as they can, thus to be able to devote as much time as they can to their lives on-line. I am not judging these people, not their overall priorities nor what they choose to do with their time on the nets. I am simply observing that they exist — in vast and uncounted numbers.
It seems reasonable to me that, if we are entering a recession or a depression, all of us are going to have to tighten our belts. We may pass on a vacation or two, or we may drive the sedan a year longer than we had planned. Dinner out? Let’s call Pizza Hut instead. But here’s what won’t happen: Absolutely none of us will cut our broadband connections. The kids can see the damned dermatologist half as often, but we’re keeping the DSL line!
Even people who lose their jobs will do what they have to to keep their internet connections. They may give up a wired phone line, but Cox Cable will still be sending a monthly bill.
Now stop and think. Don’t despair. Don’t fear. Don’t worry. Just think. Vast hordes of people all over the world who have just spent the last five or ten or thirteen years massively improving their intellectual capital are about to have a great deal of time on their hands — along with broadband connections to the internet.
Will things get bad? Maybe.
Will these be hard years to live through? Possibly.
Are we doomed? Get real!
We are immersed in wealth we are too insensate to sense, and we are about to increase that wealth by incalculable exponents. The greatest wealth the human mind can know is the time to think — hale, healthy, fed to satisfaction and nothing exigent weighing upon the mind. This condition won’t apply to everyone, and we each of us make better and worse use of the time to think when we have it. But billions of eager, active human minds will be free to think — and free too communicate their thoughts to one another.
No one should wish for the economic storms we are about to weather — and we could wish instead that some of the thinking that is done in the next few years is devoted to ridding the human race of the wealth-destroying pestilence that is government.
But taking account that we are going to weather these storms, they simply could not have come at a better time for the human race.
You can tell me about despair if you wish, but I won’t hear you, and I won’t understand you. You can tell me about fear and worry and depression — if you insist. You can tell me all about the dark, dank tunnel in which your feel yourself entombed…
But all I can see — all I can think about — all I can care about — is the light of mind that leads us out.
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