Through a Monstrous Looking Glass

Every now and then one experiences something which seems weird but then yields an insight into something going wrong with modern society. Recently travel took me again through Heathrow Airport’s new Terminal 5 in London. That $1+ billion mammoth building took more than a year longer to construct than the five years planned; it was way over budget and when it finally opened was effectively not functional for almost a year. One might have assumed, even to the point of stipulation, that British architects and engineers have had enough relevant experience with airports in recent decades to have built a really great, workable building.

Instead travelers have been treated to a monstrously large space – so large that it is full of signs telling passengers that they are 15 minutes to an hour from where they have to be, even to board their planes. If that were not bad enough, it turns out that the signage is so complicated that the airline employees whose job is to direct passengers to their flights do not even know where many places are or how to explain how to get there. For example, it is almost impossible to get anywhere without going up in order to go down, or down to go up. Perhaps there is hidden in that massive maze of confusion some rational idea/theory of what they were trying to accomplish. It might be amusing and helpful to know more what that idea was. It is well concealed, if it exists. The only thing that comes to mind is the explanation during WWII that the British navy was designed by geniuses to be operated  (sorry) by idiots, without which a rapidly enlarged navy would have been sunk in one way or another all too quickly. But, Terminal 5 really appears (sorry again) to have been designed by idiots to be used only by geniuses – and everyone else is either frustrated, angry or misses their flight or connection.

So what does the Terminal 5 metaphor tell us about the modern world?

  1. Deference to experts, simply because they obviously know more than you do, is a risky business. They need common sense oversight by civilians, just as do the military.
  2. BIG is risky because IF it does not work it is very hard to fix and it stands out like a sore thumb. Smaller often lends itself to being fixable.
  3. Massive budgets and expenditures often go to the head of people with the power to spend such large sums and they often tend to get out of control and lose sight of their mission and true goals, not to mention the public interest.
  4. When a complicated process like moving people around, between and among gates, security, planes and ground transportation is made more complicated by such an immense critical mass encapsulated in such an opaque scheme, it is almost sure to break down. Again, smaller is usually not only simpler but more workable and elegant.
  5. Interaction between people focused on getting somewhere with minimum stress, maximum comfort and simple efficiency and a vast maze, (which most people visit only occasionally, and therefore never master) leads to serious frustration, anger and worse. Hello!
  6. Massing of large numbers of people in very large spaces requires extra long lead times for planning and development, during which time the very conditions to be dealt with often continue in a dynamic process of change. The result is that the whole can become somewhat obsolescent before it is finished. Nimbleness is lost forever.
  7. Planning tends to be focused on “the last war” the best/worst example being the Maginot Line. While there are stunning examples of success in planning for the future – like atomic power generation – too many public works like Terminal 5 fail badly.
  8. Resistance to genuine innovation and change is inevitable. Terminal 5 does things basically in much the same way as they had been done for decades, except they have been made bigger, flashier and amazingly more complicated.
  9. There are ways to organize self-reinforcing accountability and thinking in large, long term/lead time projects BUT too often the political process out of which such public/private projects emerge resists those methods because they might involve changes which the political managers fear, hence ultimately they risk criticism for almost any outcome.
  10. Lastly – modesty and reasonableness frequently give way to hubris and ambition to make a statement like “this is the biggest, newest, most expensive” undertaking ever. That is dangerous thinking that needs to be avoided.

So what do the 10 foregoing “commandments” teach us? With every massive undertaking, society needs a countervailing balancing mechanism that is smart enough to understand, independent enough to withstand pressure, restrained enough not to impede for its own sake and shrewd enough to steer the actual managers to smart decisions without standing in the way of progress.

One model for such balance is the role of Ombudsmen in journalism. Perhaps the time is ripe for Public Stewards to be created on a case by case basis to provide oversight over big public undertakings?

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Frustration – the key word in today’s political life

Following is a draft of a speech that President Obama might have considered giving in an effort to explain to people how and why they are so frustrated and what to make of and do about it.

Perhaps such a speech was too much to ask or expect of a President in office because it runs the risk of sounding like excuse making. Even by his own account, though he has gotten the substance very right on the main issues, he has not achieved the political or public comprehension adequate to generate support for his policies.


It is never easy for citizens to happily accept the conditions of their lives which are less than optimal and less than they have come to believe are their due. Their discontent is entirely understandable and is particularly so when those reduced circumstances have come about, they correctly believe, because of forces beyond their control and through no conscious fault of their own.

In the last 15 years we as a nation have experienced for a variety of reasons (some good/some bad, but none unfortunately usefully related to today’s problem) two quite extraordinary boom bubbles followed by similarly extraordinary collapses.

In the course of those roller coaster upswings many Americans happily experienced euphoric ups with the good times: good jobs and increasing pay, higher home values, cheap borrowed money, and virtually no down payments for new cars and home improvements. Life felt and looked good as far as the eye could see.

Then suddenly, for no good reason they could relate to their own actions, things changed for many Americans: home prices fell, jobs became scarce, and money to make existing payment obligations was hard to borrow.  As the famous line from Casablanca goes, they were SHOCKED and naturally those suffering people were worried and looked for things they could blame and perhaps change in the hope of improving their own situations.

What they found was not to their liking. They found that the whole country had been over consuming and over borrowing. Of course, they focused on simple solutions which would be for their neighbors to slow their consumption and to reduce their borrowing.  Sadly, people never like to discover that they are part of the problem. Believe me, I know.  Presidents are not immune to that problem.

Out of that mess of problems a lot of folks came to believe in the superficially attractive, but diametrically conflicting solutions that taxes should not be increased and the government’s deficits had to be reduced, though of course, not through any reduction of their own benefits or services.

That is the driving force behind the Tea Party movements which are at the heart of today’s popular political conversation.  Frustration drives anger.  Anger drives a perceived need for change.  And the two together spell DANGER.

There is no doubt at all that all kinds of people share the blame for the reality of today’s conditions: Wall Street, the Banks, politicians and, of course, the average citizens themselves for simply doing what came naturally.

But the answer is NOT simply to throw up one’s hands in horror and hope a magic wand will quickly and easily wipe away the long developing problems that led in the first place to today’s frustration.

The only honest and sound answer is to face the reality that these conditions are actually there and will ONLY get better with time, measured partly by the time it took to grow the problem in the first place.  We all have to avoid being seduced by the unexplained and empty contradictory promises coming from frustrated pitch persons peddling ideas which sometimes sound superficially helpful, but will beyond reasonable doubt further increase the problems.

The country desperately needs to stay the course of solidly getting the economy slowly back on a sound footing.

Two years from now, when we have stayed steady on the course we set in the past year and a half, our citizens’ lives will have begun again to be the lives people once thought were theirs forever.

STEADY ON!

A Two-Track Global Economy

Terms like ‘single scoop’ and ‘double dip’ are normally heard only in ice cream shops. But at the moment, the economic and financial pages of news organizations the world over are using these types of terms to try to predict and explain what is going on “out there.” Indeed what is going on is unusual and defies conventional categorization.

The underlying problem causing this confusion is that the circumstances out of which today’s conditions arose were quite different from anything that ever came before. The several important differences account for what appears to be an entirely new scenario. Historically, economies have generally risen and fallen more or less in sync — at least among given countries and often globally. For example, it was said for a long time that when the US sneezed, Europe would get pneumonia. No longer, it appears to be the case, despite the fact that information flows more completely and rapidly than ever before, creating feedback loops which normally would knit all economies more closely together.

The several important differences which may account for why the economic world is behaving in a brand new way include the following:

  • The casino effect is much larger than ever before. The casino effect is the scale and depth of financial transactions as a share of GDP. Since the credit meltdown in 2008, banks have started lending again, although not at previous levels, so that the rest of the economy, which had depended on cheap and easy money, has not been as robust as normally is the case for an economy rebounding from a recession.
  • The big powerful companies have an enormous store of cash, in part because they slowed inventory accumulation and capital spending during the lowest points of the recession.
  • Employment has been unusually slow to come back, probably because it had been allowed to grow too much and fast in the run up to the recession and because post recession the bigger employers found they could grow again with fewer employees and the smaller employers still could not afford to put people back on their payrolls.
  • People who remain employed and whose savings/investments had rebounded nicely between 2008-2010 began to spend again out of proportion to the population as a whole–for example Apple sold several million iPads for several hundred dollars apiece to people who already had smart phones and computers. Go figure?
  • The stimulus package, which was applied so relatively quickly and early [and brilliantly] in the recession, evidently had both an immediate effect and a drawn out promise, which had different effects at different times on the economy at large. That echoing process probably accounts for the broad confusion about the benefits of the stimulus not unlike the parable of the three blind men describing an elephant.

Those differences appear to add up and account for what we see today, which is less a prospect for a double dip, but which really boils down to a two track economy. One track is carrying the businesses and people who were relatively unscathed by the recession. The other track is carrying the businesses and people who have yet to recover completely from the recession. It is not surprising that the two tracks run at different speeds at different moments, which may account for the appearance of the economy as a whole seeming to be slowing or speeding up.

What we may need to do more of is recognize the increasing significance of the two tracks and follow them more closely. One of the other factors is that it also appears that the separate tracks seem not to much affect each other, which means that the strong track may not help the weak track recover as fast as in the past when the economy was more integrated.

In all events it appears we are looking at quite a slow, long term recovery which will leave us with all the nettlesome troubles of very low employment, limited growth in personal income and spending as well as cautious capital spending. Perhaps we need a period of regrouping and re-finding our bearings after such a powerful and widespread period of growth and overspending on too much borrowed money.

The “Nanny State” Question

The recent debate on the financial reform package featured a number of arguments that, objectively, made no sense at all. While this will come as no surprise to veteran Congress-watchers, such statements are usually recognized as political posturing by press and public alike, and ignored by even their proponents. But in these unsettled times, such senseless arguments have begun to resonate – at least with the “flat world” crowd – and therefore warrant comment.

Consider a prominent argument first raised during the health care debate, but that came into its own as meaningless claptrap only in the run up to passage of the financial reform bill: “they are trying to create  a ‘nanny state’ in which government will make us brush our teeth and eat our vegetables.”

Well, not really, of course.  In fact, nothing of the sort was contained in the financial reform measure.  But even reigning in the excesses of a financial system that left the world teetering on the edge of ruin is too “prescriptive” a solution for the new Objectivists.

Topping the scolding parent metaphor was the mind-boggling and logic-twisting plaint most frequently heard from rapacious lenders: “if we can’t loan money to people who can’t afford to borrow it, how  are poor people ever going to put a roof over their heads?!”

The fact that arguments like these not only aren’t ridiculed, but actually catch on – deeply among a fringe that may or may not be lunatic, and more broadly among a general public not particularly well-versed on the issues at hand – underlies a mounting challenge for our maturing democracy: preserving the integrity of political debate in an era of increasingly complex and difficult problems that defy both easy understanding and simple solutions.

The root of this problem, sadly, is that too few people understand the abstract concepts and principles that are essential to grappling with the realities of our economic system.  Not only grasping, but mastering, those concepts is essential to ensure that the country enjoys full employment and a financial system that can grease the wheels of the economy.  We not only need, but expect, government to fill that role – to consult the experts who do understand and to craft solutions that reflect the realities of a given situation.

But the complexities also ensure that the vast majority of the public will not – cannot – understand enough to assess the validity of a particular argument for or against a proposed solution. That, in turn, leaves us vulnerable to the “through the looking glass” distortions of people who put party before principle, or self-interest before the public interest. When their specious claims take hold – as in the health care and financial reform debates – the desirable falls victim to the possible, itself sorely limited by the inanity of the arguments around it.

How, then, can we expect elected officials to act responsibly, when their employers (constituents) are mesmerized by simple, and utterly false, assertions?

Consider an example. A few years back a professor at the Harvard Business School was making this same point to a class of second-year MBA students, and asked, “Can you tell me, in a few words and a couple of minutes, why there is an inverse relationship between bond yields and bond prices?” One might think that would be a cakewalk for such a group of elite business scholars.  A show of hands, however, disclosed that less than a third of them even thought they could answer.

The answer is simply that when a new bond is issued with a 6 percent coupon, the older bond with a 5 percent coupon has to drop in price to be competitive with the new bond, because all bonds are priced in the same market by “yield to maturity.”  There are many other aspects to bond markets, of course, but if you do not understand this first principle, you cannot understand how the bond market works and therefore you will never appreciate or understand how the whole financial system works.  As a result, if you had to vote on something involving the financial system, you would be likely, given your obvious ignorance of even the most basic principles, to get it wrong.

It’s not exactly a new problem, but it is exacerbated by a world that is unimaginably more complex than that faced by the framers of our system of government.  It wasn’t simply racism or sexism that compelled Alexander Hamilton’s clearly wrongheaded idea that only educated landowners should be allowed to vote. It was also fueled by a belief, going all the way back to Plato, that responsible citizenship required a foundation in knowledge and wisdom.

No one today, of course, is longing for – or would long tolerate – philosopher-kings or standardized tests at the polls.   And I doubt that there are many people out there who want to go back to Hamilton’s idea. So what is to be done?  The problem is real, and there is no clear or easy answer.

There might, however, be some ideas or approaches that can mitigate the problem. One of them was invented over 50 years ago when, to get trade legislation through Congress, it was agreed that when a complicated package of proposals was ready for a vote, the normal parliamentary processes would, after a full debate, be suspended, and a simple up or down vote taken, with no amendments allowed. Because there is a vital need for such trade legislation from time to time, the goal of getting an overall solution in place takes precedence over trying to get everybody’s special interest input, which more often than not does little to improve a solution, and frequently is intended to undermine it entirely.

That takes us back to the beginning of this thought process. The financial reform bill sought to address the most serious problems of the last few years. One of them was the “no doc, no down payment” loans that lured millions of unsuspecting and eager prospective homeowners into deals that made lenders and brokers millions in fees while turning those “poor” folks into deadbeats, and nearly bringing down the financial system with them. When the Congress declared the practice could not be continued, critics said it was not fair to deprive even abjectly unqualified applicants the opportunity to be homeowners, despite the fact that many of these applicants have already lost the homes they couldn’t have purchased if they were not being taken advantage of by rapacious lenders. Get it? It reminds me of the defendant standing accused of murdering his parents and pleading for clemency because he was now an orphan!

Similarly, when the new stimulus package was proposed, opponents argued that it was not needed – that lower taxes and less government debt would bring the economy back to life. In this tale, they fill the role of the two-thirds the class of Harvard MBA students who couldn’t explain bond pricing. They, obviously and objectively, do not understand the rudiments of economics. Lower taxes do nothing for the unemployed; less debt does not spur consumption and thus demand, which is how jobs are created.

So we are facing a conundrum in how to break the vicious cycle of misunderstanding that can lead to perverse government policy action and mistakes. If knowledgeable and sincere elected officials are out of reach, along with a well-educated citizenry, perhaps something like the trade legislation method is needed to get complex economic/tax/financial matters passed through Congress. Such an approach might allow us to overcome the limited understanding that undermines our democracy and puts us all at risk.

Elizabeth Warren, the distinguished Harvard Law School Professor who was one of the driving brains behind the recent protections for retail financial customers, exercised extreme politesse when she characterized the problem as “cognitive impairment.” While she is correct, perhaps the description in this piece might be more persuasive, though more controversial.

The Year 3010 Seen from Today

“Why would any sane person want to think about the human condition a millennium from now?” is a question I have heard every time the subject has come up. So, why bring it up?

Perhaps some reasonable speculation might help inform us today about how to lay foundation stones for the lives of our descendants. For example, simple math shows that, if each member of each generation between now and then produces two offspring, their descendants will aggregate in 3010 some 17 billion people! Surely we should care enough about those distant descendants to spend some time and effort imagining, and hopefully helping, the world they will inherit from us.

A few years back, a visit to the Vatican Museum in Rome revealed an amazing map room which dates from around the 1100s. It is about as long as a football field and high and wide. Around its well-windowed walls are large, detailed maps of the inhabited places around the Mediterranean. The Popes of that time could stroll about and visualize their empire and make their plans. It seemed more like a map room in today’s Pentagon than the center of a church that, one thousand years ago, was far flung and growing. This prompted a lingering question: could those Popes have even remotely imagined the world of 2010? And, if they had, what might they have done differently?

In those days the Popes, though they evidently thought they knew the whole world inside and out, really didn’t. There was a lot going on in Asia they knew very little about. North and South America existentially had not crossed their horizon. The printing press, locomotion, accurate navigational tools and anything resembling modern medicine were still to be discovered.

Today, though we think we know just about everything there is to know about our world, we still do not know what we do not know, for instance, about the mysteries of the oceans, the innards of earth and the environs of our solar system. Smart people everywhere are working on all those questions, to be sure, but mysteries abound. For example, we are increasingly uncertain about some of the key fundamentals of time and space; we now know there are lots of exoplanets around stars like our sun; we know there are limits to our current main sources of energy, but we do not yet know how to tap efficiently either solar energy or deep center of earth energy. We do know that for millions of years earth has had repetitive cycles of about 100,000 years’ length in which it slowly warms and then suddenly cools. We do not know quite where we are in the current cycle, but we believe man has raised our present point on the warming curve enough to create new challenges to the sustainability of the future of earth.

Our imaginations are, of course, limited by our experience and our perspective. Fully believing in the supremacy of the Church and the literal truth of Scripture, the twelfth-century papacy would have found it impossible to conceive the discovery of a heliocentric universe or the disaffection that spurred the Reformation.

Given a crystal ball of sufficient power, might the Popes have taken steps to standardize language and education in hopes of knitting together the disparate peoples of their empire? Might that have avoided the carnage and misery that emerged from the struggles for local identity and dominance which occupied so much of the Middle Ages? Or, are such struggles not only the price, but indeed, the essence of progress?

Surely the Popes could not – would not – have imagined the transformation which did occur in the ensuing thousand years, particularly the technological innovations that have more than any other factor shaped the world as it exists today. Yes, there were geniuses like Leonardo, Copernicus and Jules Verne who came later but, even at their best, their imaginations fell short.

Technology is a fundamental – the way the future is always created. Therefore, a good starting point in thinking forward a thousand years is to ask what technologies and evolutionary developments are likely to emerge.

What are some of the things which far-thinking people might find some agreement about today, assuming that the basic conditions of life have not been changed, cataclysmic collisions from outer space from the equation?

  • Population. Today the world is home to about 6.8 billion people. By 2050 the number is expected to reach more than 11 billion.  By many measures we already have a non-sustainable sized population. Perhaps by 3010 we will have learned how, using many methods which today are unthinkable, to shrink and hold population to a manageable, sustainable size.
  • Life Expectancy. Most people on earth are living a lot longer than their forbears thanks largely to modern medicine. By 3010 there may be a need for many people to live much longer lives to be able to take long space voyages and return with time left to transfer what they learned to younger people. Perhaps life for some might become virtually endless by slowing aging and repairing (or recreating) and replacing worn out parts, including hearts? Average age might get well into hundreds of years. That, of course, raises big questions of opportunity for the young and others: if too many people hang on forever, innovation, opportunity and vision could disastrously decline.
  • Daily Life. Daily life most probably will not change too much; people will still be diurnal and will want to sleep, eat and reproduce much the way they do today. But there are likely to be some big differences too. People will consistently eat better and more healthful food. They may have some genetic mapping to help in picking their mates in order to ensure the right skill sets are being developed on earth. Perhaps copulating will become mere entertainment and reproduction with planted eggs and sperm will be delegated to women who are professional surrogate mothers?
  • Communication. It is difficult to imagine that there won’t be a single global language a thousand years from now. The techniques of communication, though, are likely to be far different.  This is an area where the sci-fi fantasies are likely to come true: embedded communications chips, practical telepathy and mind reading and near universal and instantaneous access to the full breadth of accumulated human knowledge, if not wisdom.
  • Government: The nature of government is almost certain to change radically in the next thousand years, much as it did in the last thousand.  Where feudalism gave way to the modern nation state, with nationalism and sectarianism as basic building blocks, the future will deliver a global system of governance centered on the allocation of resources – food, minerals, fuel and people. Such a system will require a high degree of local autonomy to give cohesion and sense of belonging to local population centers, which will, with carefully designed systems of taxation, support global needs with a global currency, other resources and human talents. Cultural differences among the many local centers will have shrunk, yet people will compete globally to participate in the exciting opportunities to be explorers in the many dimensions and directions of space and be elite leaders in all aspects of global life. Perhaps there will be “term limits” on many activities to create opportunity for everyone?
  • Culture. Music and art in all its forms will be thriving. More and more people, particularly the older and retired, will take up activities they had no time for earlier. Movies, books and other forms of entertainment will thrive. Moreover, the means to access them will become seamless through something like eyeglasses, which will “tune in” whatever media, wherever and whenever. Payment, will of course, be debited automatically, and most assuredly not with a piece of plastic.
  • Money. Currency will exist but it will not be physical. Everyone will have an implanted (or evolved biological) chip from which the medium of exchange is debited and credited automatically at the mental will of the host. All one will have to do is think to instruct the chip what is wanted and ask what the available resources are and they will “hear” the answer.
  • News. News will still be streamed via the global web 24/7/365, BUT there will still be a need for journalists to interpret/edit news sources and commentary for those who are interested – and most people will be interested because of their far better education. One significant benefit of life one thousand years from now: no Geraldo! And, advertising, as we know it, might give way to subscription fees for information sources. For example, Google then will be the biggest company in that world and will cost perhaps $500/year in today’s dollar terms.
  • Religion. From the beginning of time, religion, in one form or another, has been one of the key ways people have both explained the mysteries of the world to themselves as well as tried to manage like minded people. At the same time some of the most virulent problems among the world’s people have been caused by perceived differences of religion. Witness today’s clash of civilizations.  A thousand years hence, it makes sense to believe that as one language will likely have emerged, so may one religion, which could give people perspective and direction to help guide them deeper into their still unfolding future.
  • Economics and Finance. The dismal science will have become a thing of beauty. With information about everything constantly available there will be feedback loops that will constantly adjust behavior and largely eliminate what we call the business cycle. That said, the human emotions of fear and greed will still create opportunity and risk.

Obviously no one can do more than suggest the general directions of the future. The only real limitations on imagination should be the immutably powerful laws of gravity and physics. Therefore, almost everything imaginable is possible.

Most people shrug off the future, seeing it as irrelevant to their lives today. A lot of those same people in fact do read/study history simply because it is interesting and because they know they are otherwise doomed to repeat it. As the Popes one thousand years ago might have tried to standardized language and education, today our popes might try to steer the world towards a unified planet where people everywhere come to value the entirety of humanity as the people they want to share the future with.

If we give more attention to the future, even though no one alive today will live to complain or contradict anything surmised today, perhaps the future might eventually reflect some of the wisdom of these speculations.

What Columbus Must Have Worried About

When Columbus set sail for what turned out to be our shores in 1492, he was not altogether sure whether or when he was going to see dry land again. It turned out much later that some Chinese explorers had already scoped out a lot of what he found, but neither he nor most sailors at the time had any idea, though he did believe there was something there. Despite Copernicus, there were serious people who really believed the world was flat and that if they went too far, they just might fall off into a void of space.

So what does that have to do with today’s world? A lot, because we too are sailing into unfamiliar, uncharted waters, even though the GPS is omnipresent. Some of the questions that are bruited about at the moment are:

  • Do we have too much debt? Are we going to be pushed into bankruptcy by our foreign creditors?
  • When will we lick the problem of 10% unemployment?
  • How can we avoid the Depression trap of a double dip and accelerating deflation?
  • Without a growth rate like the past 20 years and massive consumption how do we recover?

And, on and on in that vein. There is no iron clad answer about the future, of course, so the flat world people today use the rear view mirror as the best proxy they can find to see ahead. And while it is true that past has in fact been prologue many times in history, this time it is most probably not true —  simply because (to stick with the metaphor) the new continent just over the horizon from us now has never been explored.

The new continent, or the future, is really different. Some of the differences are quite surprising and even profound:

  • The availability of adjustment in the modern world, when the excesses have been wrung out after the credit crisis, is simply amazing. With the internet and all forms of modern communication, including Google, our whole system is adjusting among regions, sectors, and substance daily. That was not true in the past. This kind of continuous, constant adjustment practically assures us that, if anywhere near the right macro policies are managed by our government, it would be impossible for the economy to collapse as it did in the 1930s.
  • Despite the recent credit crisis, corporate America has large amounts of cash stashed away, which it clearly intends to deploy to its advantage, particularly when costs seem relatively reasonable due to deflation. Perhaps to a lesser extent that is also true of American consumers when they see something they want. Witness: I-phones and I-pads, which are not inexpensive, being bought by the millions. Little of that purchasing power was readily available in the 1930s when consumer credit barely existed.
  • Despite the decline in manufacturing in recent decades, in part due to exchange rate adjustments, American competitiveness is increasing. That increasing competitiveness coupled with a relatively well educated work force suggests that we will gradually see new forms of employment incrementally adding to the work force, as part of the continuous adjustment process mentioned above.

The contours of “the new continent” that is just over the horizon may not yet be quite clear, causing many doomsayers to look in the rear view mirror and say  “watch out below.” For two centuries the wisest investors in America have been saying “do not sell America short.” They continue to be correct. Even though we may be looking at a long, slow recovery, which will of course have short term bumps in its path, it almost certainly will continue to favor people who remain believers.

Columbus fought with some of his captains and crew who had grown scared as the days passed without sighting land and were ready to turn back. We do not have a Columbus on our current ship of state who can command us to forge ahead. Too many people are losing faith in Obama because he has not yet “sighted” land.”  We need to find more patience to recognize and appreciate what he has already done to keep us on course. What lies ahead will surely make what lies behind fade into insignificance as the new future unfolds its magic.

Compass Confusion

There are times in life when the way ahead is clear. “Go West young man, go West!” [Attributed to Horace Greeley in 1851] was a rallying cry in the 19th century. Many people followed it and now we have California with its amazing diversity, population, genius and life. And it was easy enough to find one’s way. You just followed the path the sun took across the country.

Metaphorically, where does the compass tell us we are headed today:  North-up; South-down; West-future; East-past?

Since the Vietnam War ended in the mid 1970s the way ahead has at times been hard to find and harder to follow.

  • We had a miserable period of stagflation which ran Jimmy Carter out of a job. Call this one South.
  • Reagan’s sunny optimism unleashed a period of prosperity and consumption grounded on the assumption that less government and less taxes would put two chickens in every pot. It was supposed to feel like North East.
  • Bush One tried to keep the country in balance but lost his in the process. Strictly South.
  • Clinton triangulated everything, including his personal life, and by the end of his second term with the help of a Secretary of the Treasury, of, by and for the bond market, had presided over the greatest spurt of economic growth in memory and briefly eliminated the national deficit. They dreamed of the North West passage.
  • Bush Two, an accidental President, but an intentional cowboy, recreated the deficits, mired the country in two foreign wars and laid foundations of catastrophe. South East again.

During this same period personal consumption as a percentage of GDP rose from 60% to nearly 71% as personal income rose and our trade deficits and foreign debts rose to history making levels for a country of our size. The internet and computers came to life, bubbled over and now are a staple the world over. Information and news on every subject finds its way into every corner of earth in milliseconds. The financial sector grew from the mid 1970s level of about 17% of corporate income to between 30% and 40% from 2003 to 2009 simply by growing into a gambling  casino, though most of the presumed economic benefits accrued only to its participants, not the economy as a whole.

Then came 2008 and the confluence of perhaps the smartest, temperamentally solidest Presidential candidate with the closest thing to a financial economic collapse since the Great Depression. That candidate became President with the largest majority in decades and was greeted by the urgent need to head off disaster. Despite the trillion dollars needed to prevent a national bankruptcy, the new President deftly steered the Congress to create a giant stimulus package. The result, of course, is a vast increase in the national deficits and debt but also some renewed growth in the economy and light at the end of the tunnel.

And, despite an opposition party that knows only one word: NO – the new President managed to get signed into law the most comprehensive health care package since the 1960s, and a solid, if not perfect, financial reform package to rein in the financial sector excesses which led to the meltdown. And at this writing, it looks like there is a chance that the new President just might get the Congress to adopt an overdue immigration reform, an environmental regime and a true energy independence package. This whole process will be looked back at, in due course, with awe. North West indeed.

One can now make the case that North could emerge as the direction to take, having dodged the collapse and with a new commitment to making society work better. Others can make the case that South is inevitable because of excessive debt, which puts us and the whole world in peril of our many creditors. East appeals to those who see retrenchment as the only prudent course and with that come risks of conflicts with those who bear the brunt of less. And, finally, West has appeal because, when on a high wire, stability comes with forward motion.

Perhaps the compass is swinging wildly because we have gotten too close to the sources of “gravity” which pull a large population in various directions, so that any small variation in the vector overcompensates any stable sense of direction. Serious people are spread all over the map in their perceptions of what the direction ahead is and should be. Obviously a widely held thought/wish sees North and believes that we can ultimately grow ourselves out of a mess. The more naturally cautious like the idea of retrenchment, which they mistakenly see as prudence. And serious risk takers seem to say, “Damn the torpedoes! Full speed ahead!” or “Go West Again!”

If there is an answer to the direction to take, it surely lies in the face of the compass. No wise person today should even think for a minute about taking just one direction. That does not mean that people should just circle about. Balance, as seen with the hindsight of history, may not have been the best way to gain in what lies ahead, but it is surely the safest way for people to keep alive and well in whatever direction the compass has in store for us.