We read today that the U.S. Postal Service wants to cut a delivery day. We see a dark trend behind this story. People just don't have the money to pay other people to do stuff for them.
When you're cutting your budget, one of the first things to go usually is eating out, that is, paying someone to cook for you. Then there is cutting entertainment - not paying someone to sing or dance or tell jokes for you. Cutting travel means not paying someone to fly you somewhere and give you an exotic place to sleep. Pretty soon a lot of people are out of a job.
In 1986, an article was entitled Taking in Each Other's Laundry - the Service Economy. A critical expression was thereafter circulated - "We can't get rich doing each other's laundry." In the following years as more and more people earned their living catering to other people's inclinations - it seemed that just maybe everyone could get rich doing each other's laundry, nails, or pet-washing.
Now that the economy is contracting and have less to spend, people are deciding to do their own laundry. This is setting up a feedback cycle of job loss and spending cuts that has a very deep bottom. We expect to see the US economy (among others) de-servicing, if you will, in the years ahead just as it de-manufactured in the 1980s. This process will be very painful and disruptive for many, and a good deal more than most could now imagine.
Showing posts with label post office. Show all posts
Showing posts with label post office. Show all posts
Thursday, January 29, 2009
Tuesday, December 9, 2008
Enabling Destructive Economic Behaviour
Although we ourselves are not of the socialist persuasion, we agree with socialists that there are cases where government can actually provide useful services, and at a reasonable cost. So reasonable in fact, that the case for privatisation is not particularly compelling.
Unfortunately, at the national level, the USA seems incapable of delivering that sort of socialism (with the possible exception of the Post Office). Instead it engages in malignant lemon-socialism, where destructive enterprises are rewarded with life-prolonging capital infusions, or outright government ownership.
Take, for example, a number of large banks, Fannie, Freddie, and Wall Street firms. These outfits swindled the world's investors. All issues of criminal fraud aside, their activities were and continue to be enormously destructive economically.
Investors lost confidence in them. Any sane governing authority would simply shut them down. In any sort of free market economy, they would be done already. There are thousands of better run competitors out there to take up the slack. But yet, the Federal Government saw fit to step in and keep them going. Not because no one else was providing some useful service they are. In fact, they aren't producing any useful service at all. Quite the contrary.
Another example is the bailout of the 'Big Three' automobile manufacturers. As stated in a previous post, there are many good, sound business reasons for these companies to go out of business. It's not like there aren't lots of other companies which can make cars. If the USA has a glut of car making capacity, then a fair chunk of it needs to go away.
The core economic problem of the failed Soviet Union was that its central planners took valuable natural resources and turned them into useless waste. Ignoring issues of quality and desirability, they measured output strictly in tonnage. This was socialism at its worst.
Unfortunately, the USA is following in the footsteps of the Soviet Union. Its central planners are diverting ever larger portions of the nation's income into operations that produce little or no benefit. The litany is extensive, but includes bloated 'Defense' and 'Homeland Security', subsidies for airlines, automakers, banks, construction, insurance, mortgage companies, prisons, and real estate brokers.
Spending by Governments at all levels in the USA is about 40% of total national income. Also, about 50% of the population is dependent primarily on government for its income. This is a country fairly deep into some kind of socialism. Is it getting a good value for its commitment? Does the USA have enviable public education? a low rate of incarceration? free health care for all? a first-rate passenger rail system? The answer to these questions is a resounding "No!"
On top of that, Government in the USA is quite involved with the private sector. Does the USA have a healthy industrial base? a healthy balance of payments with the rest of the world? energy security? well-paid, content workers? No, again.
We are profiling a country at the verge of leaving the club of wealthy, advanced nations, if not heading for outright collapse. The response of the political leadership to the 2007 Depression is very telling: bailouts, handouts, and more pork. This will do nothing to make the nation more productive and increase its citizens' income. On the contrary, it will make the nation less productive and exacerbate the decline in income.
Unfortunately, at the national level, the USA seems incapable of delivering that sort of socialism (with the possible exception of the Post Office). Instead it engages in malignant lemon-socialism, where destructive enterprises are rewarded with life-prolonging capital infusions, or outright government ownership.
Take, for example, a number of large banks, Fannie, Freddie, and Wall Street firms. These outfits swindled the world's investors. All issues of criminal fraud aside, their activities were and continue to be enormously destructive economically.
Investors lost confidence in them. Any sane governing authority would simply shut them down. In any sort of free market economy, they would be done already. There are thousands of better run competitors out there to take up the slack. But yet, the Federal Government saw fit to step in and keep them going. Not because no one else was providing some useful service they are. In fact, they aren't producing any useful service at all. Quite the contrary.
Another example is the bailout of the 'Big Three' automobile manufacturers. As stated in a previous post, there are many good, sound business reasons for these companies to go out of business. It's not like there aren't lots of other companies which can make cars. If the USA has a glut of car making capacity, then a fair chunk of it needs to go away.
The core economic problem of the failed Soviet Union was that its central planners took valuable natural resources and turned them into useless waste. Ignoring issues of quality and desirability, they measured output strictly in tonnage. This was socialism at its worst.
Unfortunately, the USA is following in the footsteps of the Soviet Union. Its central planners are diverting ever larger portions of the nation's income into operations that produce little or no benefit. The litany is extensive, but includes bloated 'Defense' and 'Homeland Security', subsidies for airlines, automakers, banks, construction, insurance, mortgage companies, prisons, and real estate brokers.
Spending by Governments at all levels in the USA is about 40% of total national income. Also, about 50% of the population is dependent primarily on government for its income. This is a country fairly deep into some kind of socialism. Is it getting a good value for its commitment? Does the USA have enviable public education? a low rate of incarceration? free health care for all? a first-rate passenger rail system? The answer to these questions is a resounding "No!"
On top of that, Government in the USA is quite involved with the private sector. Does the USA have a healthy industrial base? a healthy balance of payments with the rest of the world? energy security? well-paid, content workers? No, again.
We are profiling a country at the verge of leaving the club of wealthy, advanced nations, if not heading for outright collapse. The response of the political leadership to the 2007 Depression is very telling: bailouts, handouts, and more pork. This will do nothing to make the nation more productive and increase its citizens' income. On the contrary, it will make the nation less productive and exacerbate the decline in income.
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