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Thinking about the Future

Half of 2013 is in the bag or perhaps in the bank for those who have enjoyed a modicum of prosperity over the first six months. Nonetheless, we are beginning to view the downhill landscape of a year that has meandered in a generally positive direction. Though the DOW is strong, there are far too many variables that would indicate a turn sometime in the near future. While I don’t look with great anticipation toward the prospect of economic or social negatives, the probability of a slippery slope continues to inch upward.

Politics continues to cast a pall over the American landscape, with congressional ratings at historic lows (hovering at a dismal 9%) and gridlock so pervasive that many are giving up any hope for progress during the next three years. This does not bode well for the economy, nor does it create a healthy environment for consumerism, innovation, or risk. The banks are again enjoying record profits while lamenting regulation that they predicted would stifle their and the economy’s ability to recover from the recession. The economy is sluggish but generally healthy and banks are doing quite well, thank you. As an interesting side note, in the Lords of Finance: The Bankers Who Broke the World (2009), author Liaquat Ahamed pointed out that during the previous 100 years, there were just two short periods where banks were able to sustain high profits and bankers were paid exceptionally well. These were during the 1920s and the two decades leading up to 2008. During all other periods, banks were boring, paid only moderately and were dedicated to advising and helping their customers succeed. They did not make money by trading for their own benefit but served clients and facilitated business arrangements between parties needing capital. During those periods Wall Street was known for its steady, prudent, and conservative approach and aversion to anything other than caution.

As noted in my previous Blog, there is evidence that fossil fuels will be available for quite some time, due primarily to oil sands in northern Alberta, America’s massive deposits of shale gas, Brazil’s new offshore discoveries, and new technologies that allow oil recovery in previously abandoned oilfields. However, easy oil is gone. The ‘new oil’ will be more difficult to find and much harder to extract and refine. So, production costs will rise and the price per gallon will probably be as high as if driven by scarcity. At least we’ll be able to motor on for awhile, enjoying a mobile lifestyle while we pay through the nose for that privilege.

Sensibility, Frugality, Austerity

Why do some people who never make a lot of money manage to have nice homes, money in the bank, drive decent cars, go on vacations, get their kids through college, and retire comfortably?  Research tells us that these individuals and families are sensible, don’t overspend, buy what they need, save religiously, and use credit wisely. They make plans and tenaciously follow them with a longer view than most. Do they suffer and sacrifice? Apparently not. For the most part they are not austere, but merely thoughtful people who plan and live within parameters that allow a generally fulfilling life.

America is in a period that has several conflicting variables. A growing population is facing finite or even diminishing water and food supplies due in part to escalating drought. Even with abundant natural resources, such as natural gas, coal, timber, water, and a measure of oil, there are growing doubts about whether supplies will be sufficient to support an acquisitive, wasteful population that is soaring past 320 million and industry that is equally rapacious. Is austerity the answer?  No, because it has proven unsuccessful during economic stress due to the value of active consumers and industry that must continue to invest in its own future. Wise spending, debt reduction, additional savings, and long-term planning are underpinnings of a successful society and economic health. Slow, positive growth that builds a platform for future vitality is better than austere no growth policies that stifle our natural tendency to risk, innovate and achieve.

In Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It (2011), author Don Peck reveals why the economy is much more dynamic than we recognize. It is merely different because it is evolving away from where it has been for fifty years and is assuming different characteristics. After decades of expansion and largess there are signs that major contractions are underway in many sectors. Wages are re-centering to a lower level and housing prices may never regain their formerly inflated ‘value.’ Inflation will continue to inch upward, especially as oil and food prices rise, putting more stress on middle income families and small business. For those adept at belt tightening, this contraction will be tolerable, but for how long? Peck believes that U.S. companies and institutions should invest in more jobs, even if they are for part-time workers or those who job share. He argues that, rather than lay off workers who then join the unemployment rolls and use government resources, we should keep more people working even if at lower hours. This would actually increase the number of jobs and infuse more capital into the economy. 

Peck’s overriding concern is that work sharing has the support of the majority of economists but is not being embraced by industry. It would increase capital, stabilize the economy but not overburden social services. In a stellar article in Foreign Affairs (January/February 2013), Fareed Zakaria pointed out that, in the modern era of the United States, there has been a direct correlation between investment and growth. Yet, for the past 30 years, the government has been reducing its investment in infrastructure at a time when the American Society of Civil Engineers has given the country’s infrastructure a D grade, noting that it would take over $2 trillion just to bring roads, bridges, ports, airports, water and wastewater systems up to acceptable standards. Unfortunately, Congress allocates infrastructure funds based on politics instead of need or broad economic value. The current politically driven system has proliferated and expanded to the point that may now be one of the most debilitating of America’s cultural norms.

Politics has become an unsustainable racket that has transformed America. While many people are comfortable with frugality, they are demoralized by the remorseless pillage of the middle class and deterioration of its economic foundation. The future is coming whether we like it or not. Prosperity during transformational times requires strategic thinking, clarity, good data, and will. The real question is whether we are truly prepared for the challenges ahead and will be able to avoid calamities that currently seem both predictable and probable. There are still good things happening and progress is being made, but will those positives be enough to counter predatory forces driven by avarice rather than a shared long-term vision? It’s hard to say.

JFL Pic Blue Shirt-Yellow TieWith over three decades working in and with federal, state and local government, John Luthy understands public agencies.  Known for his real world, straight talking style, he is a leading futurist specializing in city, county, state, and federal long-range thinking and planning. John is the author of Operations Planning: A Guide for Public Officials and Managers in Troubled Times, and The Strategic Planning Guide, both published by the International City/ County Management Association (ICMA). His new book, Planning the Future – A Guide to Strategic Thinking and Planning for Elected Officials, Public Administrators and Community Leaders, was released in October 2010. An innovative and dynamic presenter, John is frequently asked to speak and consult on how to prepare public organizations and communities for emerging challenges (public futures at http://www.futurescorp.com).

One Response

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