sick economy

The IEA estimates that greenhouse gases will drop by more than 2% for 2009. About 3/4 of that drop is due to the recession. The anticipated fall is greater than any previously recorded. Something is clearly working when it comes to climate change. We can reduce our economic activity for example.

If the drop proves anything it is how sick our "economy" really is. How it is an economy of consumption and waste. And to think that some people would like to fix it. To what purpose? So we can make the planet uninhabitable sooner rather than later?

Don't get me wrong. Economic activity is good. Humans need a thriving economy. But it has to be an economy that creates long term value. And that is not something our present economy does. Quite to the contrary. We have an economy that is all about slash and burn. It is all about waste and consumption.

Now you may argue, so what it has served us well. But has it? Not unless you are one of the richest 1% in the country. Otherwise your net worth has most likely decreased rather significantly. You may not feel that way (yet) and the constant brain washing in the media will certainly try to make you think otherwise, but the facts are in. Everyone is constantly getting poorer while the richest of the rich get wealthier.

It has also not made you happier. Here too the facts are undeniable. More people than ever are depressed or suffer from stress. It is a stress imposed by trying to keep up with the consumer society. Trying to outdo the neighbors by buying new stuff and spending more money. Companies constantly try to get you to spend money you don't have. It is called credit. And if you indulge in it, it will enslave you forever. It is worse than heroin.

Our economy does two things really well: 1. it destroys our habitat and threatens our long term survival on the planet, and 2. it shifts wealth from the masses into the hands of a very select few. So select that you, the average American citizen, are not one of them. Not by a long shot. You are one of those being robbed blind and you may not even notice it.

So while you may hope for economic recovery because you need a job to pay your bills, you should think about what you are getting yourself into. Because you are not an innocent player. You, with your consumerist habits, are part and parcel of this economy. Your desire to always throw out things and buy new stuff is the "engine" of this economy. And it does not have to be that way! You can easily put a stop to it.

Begin by buying local. Only buy stuff that has value and will last. Get rid of your cars and do some exercise. Throw out your TV. The list of things you can do to help is endless. And guess what? Doing these things will create local jobs. Real jobs that have value because they are worthwhile. Think about that!

Cheap imported stuff is the problem, not the answer. Walmart is not the solution. Walmart is the problem. Walmart is a big machine that serves only one purpose. To make the Walton's richer. And it does so by ripping off the poor. Walmart can sell you stuff below cost, because it does not pay the full cost of what it buys. It does not pay for the waste and pollution it creates. And it uses cheap offshore (read slave) labor to create its widgets. But Walmart is not alone. It is just one of the many corporations that form the core of our sick economy.

zero net worth

Half of the American population has a net worth of zero. You read that right, zero. They are worth nothing. They own nothing of value and they are deeply in debt. They are also about to lose their jobs if that has not already happened. Nevertheless those 150 million citizens and residents still need to eat, find shelter, get medical care, get retirement, and get an education for their kids.

Meanwhile the Bush administration is trying to free up offshore drilling. You have to give it to Bush, he is persistent until the very end. He will run into a wall at a hundred miles an hour and keep going until he makes contact. On Friday, effectively the last day of his administration, he managed to open the door for some more environmental damage. Fortunately, it won't matter much.

How about those fancy white shirts, designer suits and ties? Guess who are the major contributors to Mr. Obama's inauguration party? How about the Wall Street crowd? How about those dressed up in the costumes of deceit? Mr. Obama already "owes" more in favors than several of his predecessors combined, so why worry? Living on credit is our way of life.

There are Americans whose net worth, while collapsing all around them, is still astronomically high. These fortunate souls -or should we say greedy?- will do all that is in their power to safeguard whatever they have left, while trying to get some additional handouts and favors. Only it is hard to see who will pay them now.

For almost three quarters of a century now, the American economy has consisted of wizards shuffling wealth from the masses into the hands of a few. Starting after world war two, and employing the latest discoveries in psychology, marketing, and rip-off technology, these "architects of fake prosperity" have managed to suck the world dry.

At first they provided some marginal value, but soon enough they learned that selling hot air was both more profitable and a faster way to riches. They favored an economy based on senseless spending. Spending for the sake of spending. They convinced the American public that such spending was happiness or better than happiness. They lured people into exchanging their life's work and their life's savings for ever bigger cars, bigger homes, more stainless steel, and more useless gadgets.

Now the party is about to end. And maybe that is a good thing, although it will surely be a very painful end for most.

consumer economy

Here is how the US economy works. Consumer spending accounts for seventy percent of it. Housing, health care, education, travel, restaurants and other services totaled $4.6 trillion last year. Yes, you read that right, trillion. That is a million million or a one with 12 zeros. A mere $3.6 trillion went into food, gasoline, clothing, electronics, cars, and other goods.

To keep this economic engine running, we need more consumers and more spending per consumer. The US population is growing at less than 1% a year according to the latest estimate. The exact number given by the CIA is 0.894%. There are now 301 million people here with a median age of 36.6 years. The birth rate is 14.2 per 1,000 and the net immigration 3.1 per 1,000. That means we are adding 5.19 million individuals per year. We lose 2.5 million per year. From an economic perspective this rate of growth is worrisome.

So we need to resort to the second option: spend more per consumer. And there are two good ways to do that. One is to make sure things don't last all that long and the second is called fashion. Make it so consumers will want to ditch their old stuff for fear of looking out of date. A corollary option is to add new must-have features. The latter is extensively practiced by car manufacturers who have turned cars into driving living rooms with complementary office.

Common sense would tell you that most manufacturers will quickly combine both methods. They make goods that are not meant to last so they probably skimp on quality too. Why bother if consumers will dump items within a year or two anyways. And besides, it helps profit margins. Let's take a look.

First, what do you do with durable items such as housing ? You can get some "help" from natural disasters, and the US has its fair share of those, but unless global warming really delivers on its wildest predictions, natural disasters alone won't cut it. Fortunately, the country has a high housing turnover rate. Unlike other societies, Americans are constantly on the move. They may buy their homes but they rarely stay in them longer than renters do. That is why adjustable mortgages with a short fixed interest period are so popular. Most people figure they will move before the rate adjusts. Since they rarely pay down more than a few percent of their mortgage, they are in effect renters. And government subsided renters to boot, because they get a tax break on their payments.

And every time people move, they are highly susceptible to home improvements. Most upgrade as well, that is they buy ever bigger homes and so they need to buy more goodies to fill these homes. In 2004, the market for home improvements was $271 billion according to the Home Improvement Research Institute of Tampa, Florida. It was growing at better than 6% a year at the time. Housing turnover correlates with sales of furniture, appliances, home electronics, and other home related goodies. And these have been growing rapidly too. That is what worries economists when they look at the subprime crisis. Because we have overspent a bit of late.

We need not dwell too much on cars and electronics. Everyone knows these items rarely last more than a few years. High tech is especially beneficial. With its built-in obsolescence it is an economist's dream. As for food, the trend of eating out continues in full swing. Take a look at the obesity numbers here as obesity is strongly correlated with eating out.

Health care spending is another winner and one where the US clearly excels. In 2005, it rose nearly 7% to $2 trillion, or $6,700 per person. It now represents 16% of the gross domestic product and is expected to rise to $4 trillion or 20% of GDP by 2015. Although an aging population is often blamed, a fair chunk of it goes to elective procedures. It is fashion driven. The American Society of Plastic Surgeons reports that Americans spent $15.4 billion on plastic surgery fees, facility fees, and anesthesia fees in 2006. That is almost 10% as much as the total prescription drug market.

And what may surprise you even more is that Americans spent nearly as much on pet foods, services, and medicines. And those markets are growing even faster than human healthcare. Elective procedures for pets are now commonplace in some areas of the country. And while most of it is out of pocket, pet insurance grew at 25% last year. Some employers are starting to offer pet insurance as a benefit. That while the number of uninsured Americans is at an all time high of 46.6 million.

Education is another area where Americans like to send their cash. In 2002, the US government spent $732 billion on education, directly and indirectly. That averages to nearly $7,000 for every student in elementary and secondary education. To say nothing of private money. The US joins Denmark, Iceland and South Korea in spending nearly 7% of its GDP on education.

When it comes to both healthcare and education, many would agree that despite all the money we spend, we do not seem to get very good value for it. Nearly everyone would agree our education system is lacking. When it comes to healthcare though, opinions are more divided and there is a strong feeling that we are the best in the World. Objective measures tell otherwise.

As indicated before, common sense will tell you that high turnover leads to mediocre quality. Unfortunately, it also leads to high waste and pollution. This is the price we all pay to keep our economic engine alive and well.