Friday, October 23, 2009

Leaving Economics in the Dust

This blog uses the Complex-Systems Theory of Culture (Gehlsen, 2009 - find this book on Amazon) to examine and explain current issues confronting America and the world. My posts have focused on the economy because I consider this crisis the most pressing issue of this generation. The American economy is withering, unemployment continues to rise toward record highs, and our leaders don’t seem to know how to solve this crisis and stop our economy from spiraling down into another “Great Depression”. The science of Cultural Evolution indicates that the impending economic depression will be far worse than the Great Depression of the 1930s.

The powerful new conceptual tool that I use to analyze current topics in American culture is the only published scientific theory that explains culture. Cultures are evolving information systems that function as open systems, which are dependent on a flow of information through the system. The flow of information provides the foundation of the evolutionary process in cultures, and the accumulation of information to produce new knowledge is the basis of the transforming mechanism of cultural evolution.

Economic systems are fundamentally information systems, but they are easiest to analyze and evaluate from the perspective of the flow of money. Modern economic systems are sustained by a flow of money, which is ultimately dependent on the flow of information. The flow of money is produced by consumer spending, which is the primary fact for understanding the functions of economic systems.

The American economy was driven to an unstable configuration by thirty years of consumer spending that was based on runaway debt. After WWII America became the “manufacturer to the world”, and American economic growth was produced by the emergence of a vast middle class and a seemingly inexhaustible reservoir of middle class wealth. The last three decades of American economic growth have been marked by a decrease in manufacturing, a dwindling middle class, and a depleted reservoir of consumer wealth. Recent American economic growth has been sustained by unprecedented debt spending. Economists were lulled into believing that economic growth could be sustained without a significant manufacturing component to the economy. Apparently standard economic indicators did not reveal the fact that consumer wealth was nearly exhausted nor that debt-based consumer spending was unsustainable. The system has now collapsed, and long-term survival depends on rebuilding a significant manufacturing sector (30-40% of GDP).

The American economy was not stabilized by nearly two trillion dollars of government intervention in less than one year, and consumer spending continues to dwindle, which causes the economy to continue to wither. This process forces unemployment to higher levels, which results in less consumer spending. Increasing unemployment is not just a lagging indicator; it is a predictor of future economic decrease. This downward economic spiral will continue until the system reaches a level of consumer spending that is sustainable. Sustained high levels of unemployment will become a lagging indicator when consumer spending ceases to dwindle and unemployment stops increasing. The sustainable level of economic activity that we are heading for will be far below the August 2008 level, and “real” unemployment numbers will be significantly greater than 20%.

The looming “Great Depression” is not inevitable. Consumer debt can be restructured to reduce payments and increase the amount of money consumers have for purchasing goods and services each month. This is not a long-term economic solution, but it is the best way to increase consumer spending, which will start an immediate and dramatic economic recovery. Increasing consumer spending will reverse the unemployment trend and put Americans back to work, which will increase consumer spending and send the economy spiraling up to higher levels. Once the economy is truly recovering we can begin to tackle the difficult task of rebuilding the American manufacturing sector.

The choice is clear, increase consumer spending and produce immediate economic recovery, or sink into the greatest economic catastrophe in the history of the world.

I am now changing the focus of my analysis to a new cultural topic.

1 comment:

  1. I'm one of the "lucky ones" = I have health insurance! However I just got my information for 2010 enrollment. Once again there is an increase in cost of 21%. It is NOT Obama that is trying to kill me (yes I am someone's granny) it is the healthcare industry. I'm 62. If I live to be 85 my healthcare, at the current rate, will cost me $40554 PER MONTH - that is nearly 1/2 million a year. Well maybe my stock market investments will appreciate - no Wait - They are all GONE!!!