ACT NOW OR FACE CATASTROPHIC CONSEQUENSES.
THE FIVE YEAR SYNDROME
During the last few decades we have seen the slow and painful demise of several industries in the West. The consequences of this development are present in the daily life of tens of millions if not hundreds of millions of people who now work for minimum wages all over the western world. Political leaders have failed to anticipate how this severe blow was going to destroy the middle-class. They are failing us again. Not only do they tend to ignore the subject, worse yet, when it comes to creating living income jobs, they have no clue on how to make it happen. They get away with this impotence time and again thanks to our systems which fall under what I call the five year syndrome. In five years, an executive will have secured another contract and an elected official will have won another term. And most of them do for it is easy to find excuses when you have to justify a short term failure. So, why should they care to live up to their commitments if they cannot be held accountable for their poor performance?
Notice the absence of any long term plans in both the private and the public sector then you would know what I am talking about. How many times do we hear about corporate executives collecting bonuses despite running their company to the ground? Political leaders are no difference. Even when they lead their countries to ruin, they still collect their pension, publish their books and command hefty fees for their speeches and public appearances.
LONG TERM PLANNING
Now more than ever we need a long term plan to revive the middle-class and revitalize the economy by creating good paying jobs. Lack of planning in the past resulted in the destruction of a large portion of the manufacturing sector. This tragic development did not take place overnight, it was slow and gradual. In fact, it stretched for decades. As bad as things are, they will get even worse if we do not immediately start planning to invent new industries which can afford to pay decent wages. Let me first explain why I do not agree with the group of people who find the current economic conditions to be satisfactory and even believe that maintaining the status quo is the only way to make things better.
THE STATUS QUO
Most economists acknowledge the fact that the recent drop in the unemployment rates do not reflect the true picture of the labor market. The same goes for economic growth. However, whether you agree or disagree with them will only matter for the impact the current conditions are going to have on the economy in the next twenty or thirty years.
THE CONSEQUENCES OF INACTION
The best way of convincing our political leaders to act now and plan for a better future would be in showing them what I believe could happen if they don’t. Why I believe that an economic meltdown would be eminent. Why the western civilization could collapse as a result.
Do not count on maintaining the same level of employment. Even low paying jobs are going to be substantially reduced.
Face the fact that by the year 2035, the population will have started to shrink and will continue to do so for decades to come.
The impact of such a development on the economy would by far be greater in proportion than the drop in the population.
Relatively speaking, the baby boomers enjoyed better economic times than the post boomers. For that reason, some of them were able to save for retirement, some even were able to acquire wealth. Moreover, the economic conditions still offered seniors the choice between an early retirement or staying in the workforce. With huge deficits, and the higher jobless rates anticipated in the future, these options will not be available. The economic conditions will make it almost impossible for anyone to retire early, and the job market will no longer accommodate seniors. As a result, governments will have to spend more on supporting the aging population. This in turn will mean more spending and higher deficits.
This development is bad for boomers and it will be worse the post boomers. Most of them are struggling as is, let alone saving for retirement.
The point is that, due to the above reasons, the slowing down in the economy will be in relative terms much greater than the drop in the population. Proportionately speaking, a shrinkage of 10% in the population could result in a 30% drop in economic activities. This by itself would cause an economic meltdown. Unfortunately, the drop in the population could be much higher. And, this is when the western civilization would be facing total collapse. Though, in North America, we have been successful in adding on about 10% to the population every decade or so, this trend will be reversing itself once the boomers start to depart.
All these consumers that kept the economy going by patronizing restaurants and the hospitality industry in general, by supporting the travel industry, by sheer purchase power and spending, by the ability to afford health insurance, by creating wealth through investment, and by taking parts in all sorts of economic activities, all these consumers will be gone without enough new ones to replace them. Even the crime rates will be going up, for the only reasons we have been experiencing low crime rates is mainly due to the fact that an aging population tend to be more peaceful than a younger one. Once the population starts the shrink, all businesses will suffer to the point where they will cause the stock markets to collapse. And, where in the past, other wealthy boomers moved to North America and played a crucial role in rescuing the housing market, new ones will not be around to duplicate the same act. Simply put, America may stop to attract millionaires from abroad when they may be able to settle in better places. In fact, we may see the opposite migration of the rich taking place.
As is, save for the odd exception, most western nations are running huge deficits and piling up enormous sovereign debts. By itself this should be alarming. Particularly, when spending on defense has been cut by a large percentage. For instance, the U.S. has been running a trillion dollar deficit for almost a decade. The deficit was not that high even when the pentagon needed a huge budget to fight two wars. Now, here is the scary part. No one knows when any country will be able to balance its books and no one knows what is going to happen if the trend of huge deficits is to persist. Not only are we burdening the future generations with this colossal debt, but we are leaving them no plans to pay it off. In fact, with the anticipated drop in the population, the share of debt might double for every individual. With the anticipated high rate of employment, the erosion of the tax base and the drop in economic activity, one would only anticipate the deficit to worsen and the national debts to grow larger. Though, governments do not declare bankruptcy, the time will come when they will not be able to raise enough taxes to pay for the interest – let alone paying for any principles.
This will be taking place at the time when the population is shrinking. This is the time when the need for government action to offer incentive for new parents is the greatest. Yet, regretfully, due to the size of the debts and deficits, most governments will find themselves in a catch 22 situation. On one hand they cannot afford to help, on the other hand they will be in deeper trouble if they did.
With this development, the U.S. dollar will be devalued to a fraction of its current worth. Now, with all the uncertainty, the violence, the widening disparity between rich and poor, the disruption to all economical activities, the fear and chaos, the economy will be taking another severe blow. This is when a total economic meltdown could trigger the first motion which will lead to a failed state.
More trouble on the horizon could be caused by the depletion of resources. To this day, no one can tell us for sure when we will be running out of oil. However, it seems to me that it will be taking place at the same time as nations are going to be struggling with all the issues stated above. All that, and yet we have not considered the challenges we are going to face with growing enough food. According to several studies, the world is running out of fresh water. In many regions, drought has turned fertile lands into a barren waste.
CONCLUSION PART TWO
Most people may deem my views as pessimistic and I am fine with that. For there will be no harm done if we were to work on the proposals which I am recommending. There is nothing wrong in being prepared for any unforeseen events. After all, the worst that could happen would be in having surplus of food and a heated economy. By doing nothing, on the other hand, in the best case scenarios, we would aiming for mediocrity. I mean, if we have seen countries like Italy, Spain, Portugal and Greece coping with almost half of their youths living with no prospect of ever finding work, what guarantee do we have for not facing the same situation? Particularly, when according to statistics, we are already on the way. However, in my forecast we will be taking a greater risk that foolish, blind and unnecessary. Indeed, we would be risking the survival of the human species. And, who wants to be responsible for such as reckless gamble.