Archive: Opinions

One of my favorite U.S. presidents is Harry S. 'Give 'em hell' Truman. I am not alone in this admiration, as he rates highly in many people's minds and was/is certainly controversial. But, truth be known, many of our best presidents (and it takes a good twenty to fifty years for a real assessment of history and presidents) didn't exactly kowtow to current popular opinion or 'opinion polls', and possessed a longer range and high opinion of the office, but were frequently pretty humble in many aspects of their lives.

One of my favorite quotes of Truman is one where he said he wished for 'a one-armed economist' on the White House staff. When asked why, he replied that he would no longer be subjected to the phrase 'on the other hand'. That phrase was a favorite trope of economists and 'experts' then, and now, and indicated that perhaps the economist didn't exactly know what was going on.

I'm not exactly sure why I'm fascinated by the American economy, economics being called the 'dismal science', but I do know that it is frequently an excellent barometer of what is really going on in the American mind, and is far more influential than many recognize. I certainly don't understand any of the theories and can get quite easily lost in trying to understand extended economic thought. I do look to two economists, though, as a kind of mental base camp, as they were much more than theoreticians, more sage than often given credit for. These two are Milton Friedman and Alan Greenspan.

Friedman's magnum opus was 'Freedom To Choose', published in the late seventies, and I soaked it up. It was more of a celebration of American free enterprise and 'why' it works, than a textbook. It was a bestseller and one of the foundations of the Reagan Revolution. Friedman's ideas and extrapolations made sense to me, a neophyte, and a few million of others who only understood one or two tenets of economic theory. That idea was the concept of risk/benefit ratio, the idea that we as humans operate constantly, in almost very decision (and we make hundreds a day), in our own best interests and calculate accordingly, from the simple to the complex, in all matters involving life and its complexities. In another manner of speaking, we are always looking to minimize risk and maximize reward. This needed no formula for me to understand and grasp. Free enterprise and the 'freedom to choose' became a sort of bible and all I really needed to understand about economics and the ebb and flow of economies.

Greenspan? Watched an interview of him a couple of days ago on CNBC, (and have read his bio) and at 92 years of age he seems as sharp as ever. An acolyte of Ayn Rand's (she nicknamed him the "Undertaker" in the 60's when he attended her weekly bull sessions in New York), he is the personification of the understanding of how America thrives economically (and also when it doesn't) and still has his finger on the pulse of things that seem to befuddle a school of modern economists who lock-step in outmoded theories and when interviewed as so-called 'experts', they still mumble 'on the other hand'.

Where I'm going with this is to show that my understanding of economic theory is practically nil, and that my two admired professors of economics are more sage about the vagaries of the American economy and see things at their most basic, simplest if you will. No formulas, no mumbo-jumbo, and certainly they are not bothered by contradictions, because they are not jammed into an intellectual corner by outmoded ideas.

The current American economy seems to be very confusing to any number of 'experts', especially those who write and get paid to write economic news, and it struck me recently that much of what is being said and written about this economy might be wrong, or at the least misleading.

For instance, accepted thinking for years is that 'full employment' is five per cent. It was three percent in the seventies, but when 'they' changed I'm not sure. Well, here we are at 3.7% and more jobs are continuing to come on line that aren't being filled, at all range of incomes, from flipping hamburgers to driving trucks to programmers and AI experts. Common economic theory has been that inflation would push upwards as more people spent more money chasing 'fewer' goods, but in this current economy consumers and businesses continue to spend and inflation is, weirdly, 'tame', flying in the face of common economic thinking. We were told that if unemployment went this low, wages would stagnate, but if you search below thee headlines (which seem frequently misleading, as bad news sells better than good news), you'll find that workers on the lower end of the earning scale are doing better and better. Many will dismiss this, but take a look, if you will, at some of the available stats, and if you need an easier way to find proof, look at fast food restaurants who can't get people to work offering up to $15 an hour even in Ithaca. These common and often new consumers who are pushing the unemployment numbers below 4% are spending, and inflation is not rising as much as the economic theory took for granted.

There are other indicators which fly in the face of accepted theories. These are the well-worn cliches and textbook thinking that experts keep using that only muddy the scenario, due, I think, to muddy thinking. The economy continues to chug along: GDP is still strong (while Europe and China struggle), and it is now the longest 'recovery' in recent history. Our pollsters have said that Americans think a recession is imminent when no such threat (other than doomsday headlines) is eve on the horizon and most Americans cannot even define exactly what a recession is.

I ran across a quote the other day which prompted this column, and it had nothing to do with economics or the current mystifying American economy. It was while reading Churchill's history of World War II. Churchill opined that "generals are always planning for the last was". He didn't mean the 'last war' as in a future conflict, he meant that they all planned for the previous war that they either won or lost. Generals use lessons from the last war which guarantee they will be surprised and shocked when they are confronted by a new generation of realities, new weapons, new strategies and doctrine.

And I come to the conclusion that economists, for the most part, are doing exactly the same thing. The theories, the posits, the equations, the predictions are all based on theories and lessons learned in the early and middle part of the 20th century. Almost all of these theories and equations are based on an economy that no longer exists in this first half of the twenty-first century. The realities which are sometimes thrilling, sometimes scary, were in reality only foretold in science fiction, not economic theory. The industrial revolution of the 19th century is long gone, but we are still depending on 19th and 20th century thinking to figure out the current economy, its direction, the service economy and its predominance, the artificial intelligence revolution, how the automated and robotized economy is supposed to work. All of these theories of the past industrial 'revolutions' are now corrupted, rusty, and quite frequently totally misleading, which is the reason for a plethora of wrong assumptions and predictions, much less accurate thinking for the near future of industry and economic thinking.

I think our current economic situation is much like, in essence, the early 20th century when it took years for someone to actually figure out how the invention and taming of electric motors could be fully integrated into the factory and everyday life. It didn't happen overnight, although to those who were not aware (most people) it certainly seemed to have happened overnight, much as we seem to feel that the current revolution in technology is happening faster and faster, and seemingly overnight. The current computerization revolution started to pick up steam (and some would say democratization) in the early 90's and is now supercharging the economy in ways that we are not fully aware, as is evidenced by contradictory bits and pieces which we hear and read, and it seems that economic thinking is being turned on its head. The sages and experts and talking heads are, as Churchill said, 'planning for the last war', or, you might say, the last industrial revolution. We've yet to fully understand the dramatic changes being wrought in our world and how economics is being stood on its head. Call people like Elon Musk and others of his ilk 'crazy', but they could just as easily be viewed as visionary, but ahead of their time and understanding the revolution that is going on under our noses, with no real textbook theories or road maps to guide thinking.

And, if the above is basically true, then it stands to reason that the current economic march is not a 'Trump Bump', not a simplistic reasoning of tax cuts or regulatory loosening. It is quite possibly an unleashing of the American engine of free enterprise, and the economic miracle has nothing to do with who is in the White House. Think of Herbert Hoover, who had the bad luck of a stock market crash on his watch, the cause of which is still being argued about Jimmy Carter's debacle and electoral loss due to a 'misery index' actually began in 1965 when Lyndon Johnson stoked inflationary fires which Richard Nixon and Gerald Ford tried to quell with wage and price controls and 'WIN' buttons, and finally rolled into Carter's 19% interest rates and 12% inflation which he really had nothing to do with. The Clinton 'balanced budget' in 1994? Quite possibly a ten-year result of Reagan's 'voodoo economics of the '80s, while Obama had the misfortune of being elected just as the economy was being smashed due to years of profligate lending by banks in the early 2000's.

What I'm trying to posit is an idea that Kurt Vonnegut once jokingly described as 'He (the president) thinks he's driving this big mother down the road' in reference to a president leading the American economy (all $50 trillion of it...). I think Trump has accidentally walked into what may be touted, in the very near future, as the third industrial revolution that has been developing and growing quietly, now explosively, since the early nineties when our current entrepreneurs and forward thinkers were in college dorms dreaming up what we now accept as 'the age of computers'. They might have been reading science fiction, but they were dreaming of a future with no known limits. And they certainly weren't paying attention to economists, theorists, and nay-sayers.

Let Trump tweet, let talking heads conjure and posit old ideas, let a group of presidential and congressional wanna-bees spout reasons (or cures) for what they perceive is the right or wrong course for the bustling economy, from tax cuts to confiscation of legitimately earned wealth, their perceptions of the right or wrong course for the economy, business and government.

But, if we're still planning for the last century while artificial intelligence and the 'new economy' continue to set the course in this still-new century, we won't see the future ahead. Maybe whoever it was who recently proposed a cabinet-level post of Department of the Future was correct and prescient. But, on the other hand...