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The Problem with Inequality

The 2013 movie, Inequality for All premiered at Sundance Film Festival in the Documentary Competition section and won a Documentary Special Jury Award for Achievement in Filmmaking. Directed by Jacob Kornbluth, the film examines widening income inequality in the United States, which lately has been a major national topic among academics, politicians, and plain old folks that are tired of working more for less.

Since the 2007-08 financial crisis the issue of income inequality has gained public awareness. The foundation for much of the concern is grounded in some stark and troubling data. In the thirty years before the latest recession the U.S. economy doubled. But, according to this documentary, these gains went to a very few. As of 2013 the top 1% of earners now take in more than 20% of all income—three times what they did in 1970. Distortions are even more extreme at the very top. The 400 richest Americans now own more wealth than the bottom 150 million combined. This level of inequality poses a serious social and economic risk to all Americans, regardless of income level, due to skewing a playing field that historically allowed virtually anyone to make it big. We are now seeing much more anger and resentment from a frustrated middle class who feel the American Dream has been taken away and is being held hostage by the rich and powerful.

At the heart of the film is a simple proposition: What constitutes a ‘good’ society and what role does the widening income gap play in the deterioration of the nation’s economic health? Narrator Robert Reich, former Secretary of Labor and professor of economics at the University of California-Berkeley, distills the story through the lens of widening income inequality—currently at historic highs—and explores what effects this increasing gap has not only on the U.S. economy but American democracy itself.

Pulitzer Prize winning author Michael Hiltzik noted on February 4 in LATimes.com that discussion about the middle class being left behind has become, “part of the mainstream kitchen table debate” in America. Also cited is the new Gallup poll that found fully two thirds of adults are either somewhat or very dissatisfied with the distribution of wealth in this country.

The trend is growing more acute. Since 2009, 95 percent of U.S. economic gains have gone to the wealthiest 1 percent of the population. While stocks on Wall Street are soaring, salaries across America remain stagnant, not even keeping pace, dollar for dollar, with salaries and wages of 25 years ago. Los Angeles Times writer David Horsey noted (January 21) that those at the top of the social ladder have one overriding goal: “to protect what they have and get even more.”

New York Times columnist David Brooks weighed in with a deeper review, citing the need to understand the many contributing factors to income inequality. He noted that growing affluence among the wealthiest Americans is definitely not causing problems within the middle or poorer classes. Most issues, which have also been reported by Pulitzer Prize winning New York Times writer, Tom Friedman, result from the phenomenon of globalization and cheap foreign labor that has dampened U.S. wages. Moreover, mitigating social forces include a dysfunctional (or at least unequal) education system, insufficient technical training, an entitlement culture, and decades of largesse even among the poor have contributed to the current condition. Friedman’s book, That Used to be Us (Farrar, Straus and Giroux, 2011), cited numerous contributing factors and forces responsible for a perfect storm of economic stagnation for the American middle class and those who remain classically poor.

In a January 26 article (The Other Kind of Inequality) Wall Street Journal writer Mickey Kaus suggested that the decline of American social egalitarianism is more worrisome than differences in how much people earn. Merely hiking the tax rate for the wealthiest Americans or boosting the minimum wage will not solve deeply ingrained problems that began over 50 years ago.

In the Land of the Free, people pursue the American Dream and, even with the wealthy taking home the top 50 percent of the nation’s income, there is no absolute barrier to success. Just ask the many private and public sector employees who began their careers among the poorest and least advantaged. There remains ample proof that virtually anyone can break free of economic, social and educational shackles to become highly successful. Those One Percenters who are calling for income redistribution miss the point. Taxes pay for the infrastructure and services we all enjoy and the rich cannot enjoy those benefits any more than the poor. They do, however, pay more for that infrastructure due to making more. In essence, this already redistributes wealth to sustain America’s framework- its roads, ports, airports, schools, bridges, public safety services, health services, military, etc

As Kaus noted recently, it is a problem without a clear solution. Some people somehow get through high school, technical school or college and go to work. Some prosper, some don’t; and, some had to work through school and some didn’t (most did or borrowed to the hilt); but of those who gravitated upward, most did it through hard work, perseverance, grit and luck. Inequality is a social norm. Even the most primitive societies tend to stratify. What could and should make America different is the role the wealthy play in helping others, teaching, sharing ideas, and contributing to institutions that open more doors to all citizens. I like the Buffet/ Gates approach-make a lot of money then use it to help others by financing innovation, healthcare, preventive medicine, research and education. Taxes aren’t the answer. The true answer lies in one’s conscience, world view and commitment to the global community.

jfl-pic-blue-shirtyellow-tie.jpgWith 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). Reprints of his book, Planning the Future – A Guide to Strategic Thinking and Planning for Elected Officials, Public Administrators and Community Leaders (2010) has sold out three times. 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).

THE CORNER

Homilies abound about ‘turning the corner’ but accurate manifestations are often elusive. These days, it is difficult to predict anything with reasonable certainty, but I continue to envision what might be relative to what is. In other words, hope springs eternal, but must be moderated by reason and analysis.

To be sure, we have entered a zone that is rife with swindles, exotic business deals, political jousts, global protests, sectarian conflict, revolution, resource depletion, climate change and unsustainable financial mischief that is leading nowhere. While this may seem negative, just listen to the news or read any sensible journal. Of course, the U.S. housing market is enjoying a moderate rebound, the DOW remains reasonably strong, consumer confidence is beginning to recover, and business is hiring. The central question pertains to sustainability.

Reports conflict over whether there is growing geopolitical harmony or if the fenders are rattling more than meets the eye. Dispassionate analysis indicates little real progress and a growing ‘reality avoidance’ posture. Who knows what the real story is in Greece, Spain, Italy, France, England, and the rest of the EU? Some sources indicate a culture of ‘false positives’ that are being reported to boost nationalism and continental morale. What is really happening and how it may impact this country is anyone’s guess. The same is true with China, Russia, India, Brazil, Mexico and other struggling economies. Are they reasonably healthy and will they contribute to a stronger global economy?

A June 15 New York Times article (Even Pessimists Feel Optimistic about the American Economy) touted “the start of a new era of cheap energy,” in the overblown assertion that the worst is behind us. ‘Cheap’ oil was historically less than $20 per barrel and allowed massive progress throughout the 20th Century. Current prices rarely fall below $90 and can whimsically soar to over $100 (recently $107). Plus, current oil supplies are expensive to extract and refine, so expect prices to escalate. Oil will not be cheap; nor will education. Quoting George Mason University professor Tyler Cowen, that same article blathered on about how learning is being transformed by on-line education, which opens new doors to those without the means to take traditional university courses. However, the value of many on-line degrees remains highly questionable, regardless of the price. America needs technicians, scientists, engineers, doctors, mathematicians, physicists, chemists, and machinists. It’s difficult to produce talent in these fields through on-line courses.

Turning the corner requires thoughtful analysis of various realities and how those realities factor into an uncertain future. The number of U.S. citizens living in poverty is at an all-time high. The cost of living is high and inequality among various social strata is America’s greatest cultural and economic de-stabilizer. While many are doing well, the vast majority is not. Wages have not kept pace with the cost of living, health care is expensive and the best methods of providing affordable care are constantly debated; the U.S. remains far behind other countries in educational performance; our crumbling infrastructure needs a $2 trillion infusion; and the economy remains based on service instead of on value-generating production.

In a recent Charlie Rose interview, co-chairman of Pimco Bill Gross expressed that the headwinds were strongly against wage increases for American workers as the competition between man and machine accelerates. More jobs will be lost unless re-shoring gains momentum and new production facilities are built. Deleveraging has reduced personal, business and sovereign debt but has also reduced the inclination to invest, at least until there are stronger signs that 3 to 4 percent returns are possible.

The remainder of 2013 will be relatively strong, with general stability and cautious optimism. The U.S. will see slightly higher inflation, marginally higher interest rates, around 2 percent growth for the year and perhaps over 2.5 percent in 2014. As with all probability forecasting, there are too many ‘Black Swan’ variables that may enter the equation. In my view, the corner has not been turned and we may not be building enough momentum to generate a robust 2014. For the remainder of this year, the best course is to invest in planning, careful analysis and conservative opportunities, while building a stable platform for a stronger 2014. There are highly volatile forces at play, so stay focused and prepared.

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). Reprints of his book, Planning the Future – A Guide to Strategic Thinking and Planning for Elected Officials, Public Administrators and Community Leaders (2010) has sold out three times. 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).

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).

Myopic America

Those concerned souls who perceive the glass as half-empty are often rewarded by seemingly random events that justify their admonitions. When BP’s massive Deepwater Horizon Malcondo well blew out on May 24, 2010, followed by the Fukushima nuclear meltdown just a year later, many predictors of a dire future embraced these events as validation of earlier warnings. The same holds true with those who have amassed enormous amounts of data indicating climate shifts that will alter life on this delicate planet. So far, weather patterns have behaved as predicted and, whether causative factors can be proven, it is clear that serial 200-300 mph tornados are becoming more common, along with drought, violent storms, floods and jet stream relocation.

In the meantime, the DOW has been hovering around 15,000, consumer confidence is generally strong, and the economy is showing signs of renewed vigor, albeit weaker than hoped for in mid-2013. Judging from what I read and by studying social and market behavior, it appears that most choose to ignore negative and challenging forces, even if backed by significant scientific data and historic relevance. As noted in this space over three years ago, those now living in America don’t know truly hard times. Especially when compared to our parents and grandparents who endured the Great Depression and WWII, those of us growing to maturity since 1950 have never known true hardship. Even the poorest Americans have many options provided by non-profit organizations and public social services agencies that moderate the most serious effects of poverty. The American poor, when compared to the poor in Europe, Asia, Middle East or sub-Saharan Africa, have it pretty good.

Perhaps the greatest concerns, when looking just 10 to 20 years ahead, are social, cultural and economic evolutionary patterns that indicate an almost total ignorance of trends and predictable outcomes. In their recent books, Too Much Magic (James Kunstler) and The Efficiency Trap (Steve Hallett) (both on the must read list), the authors lament that far too many middle aged and young people totally disregard historic fact and clear data and instead assume that some magic technical solution will emerge to solve every identified challenge. And, that consumption continues to outpace production and resources are being rapidly depleted. The global population is above 7 billion and remains on track for 9+ billion by 2050. Potable water supplies are rapidly declining due to drought and agriculture must compete for available water to grow crops to feed more people. The hunt for oil has assumed almost comic proportions, with idealistic and laughable assertions that we’ll never run out of oil (Charles Mann in The Atlantic, May 2013), when actual global production has not increased nearly enough to keep pace. As Kunstler notes, there is a real dilemma when young people disregard facts related to resource depletion and equate technology to energy. Technology may help create a path forward, but it cannot replace oil reserves, forests, depleted fisheries, minerals and water.

Of course, throughout history there have been fluctuations that became cycles. Today, some trends lead to predictable events and evolutionary progress while others are difficult to assign any measure of probability. My view parallels that of Tom Friedman, who, along with Michael Mandelbaum, suggested in That Used to be Us (2011) that we first must clearly define the world in realistic terms then decide exactly what we need to do to thrive in it. Second, this country has failed to deal with its biggest challenges-particularly education, debt, deficits, energy and climate change and now must deal with all simultaneously. Unfortunately, they are all huge issues and will take time, resources, and collective will, which seems in short supply when witnessing the political and economic dysfunction in this country.

As a society we are nearsighted and seemingly oblivious to spiraling trends that are leading America away from its traditional path. We have the data, ingenuity, resources, and institutions to regain our will and vision; we have the power to decide what is important and create sensible plans that will chart a new course toward a desired future. The ultimate questions pertain to whether we are too soft, too relaxed, too focused on recreation and too self-absorbed to intervene in our own misadventure. Are we still capable of such an intervention? Or will we continue celebrating the DOW, ignoring the challenges and enjoying our vacation from the truly stark realities of our time?

It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.                      Evolutionary Theory

jfl-pic21With 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 government 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 2010 book, Planning the Future – A Guide to Strategic Thinking and Planning for Elected Officials, Public Administrators and Community Leaders, is being hailed as the best book for public managers and community leaders who are committed to building a sustainable future.  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).

A Sharing Thing

The March 9th edition of The Economist dedicated several pages to the new ‘sharing economy,’ citing a variety of positives. This emerging ‘collaborative economy’ allows the public to participate in the practice of ‘collaborative consumption’ which in turn has economic, social and environmental benefits. With Avis, General Motors, Daimler and other multinationals getting into the game, it would appear that broad-based collaboration can also generate significant sums for those with excess assets, or more specifically, with the wherewithal to establish businesses to connect the dots. Maximizing underused personal or corporate assets seems honorable, practical and somewhat strategic, especially in a struggling economy with growing social inequity.

While it seems sensible to embrace the elective sharing of autos, trucks, homes, condos, equipment, sports gear and camping spaces, I wonder if a more progressive view isn’t warranted. There was no mention in this article of public sector assets and the wisdom of sharing the enormously redundant government resources found across America. When reviewing the classic organization structure found in virtually all cities and counties, there are identical services with the same mission, expertise, goals and operational plans. Counties have clerks, treasurers, assessors, HR staffs, and departments for IT, GIS, public safety, parks, economic development, public works and utilities. Cities have very similar IT, GIS, public works, public safety, economic development and HR departments, as well as clerks, treasurers, etc. Both may have recreational facilities, libraries and social services programs. Especially in a difficult economy, even a cursory analysis will raise questions about redundant and enormously expensive operations. And, with the emerging emphasis on shared assets and collaborative consumption, why was government not discussed?

Service consolidation has been debated for many years, but tends to lose momentum once local elected officials begin to understand the loss of power and self-determination that might accompany service and departmental consolidation. Incumbent managers could potentially be in jeopardy, with many senior professionals losing positions deemed unnecessary once services were streamlined. My question is, Why is this so different than business? It has been over 20 years since Ted Gaebler and Dave Osborne wrote Reinventing Government (Penguin Books 1992), the first deep dive into consolidated and entrepreneurial government. This movement failed miserably within ten years, and the reasons why are instructive.

After making a splash on the lecture circuit, Gaebler returned to city management and expressed concerns that too many cultural and institutional barriers existed in most areas of the country. Even though entrepreneurial government and service consolidation made sense, there was not enough ‘pain’ in most communities to force necessary change and the concept of ‘home rule’ and centric governance contributed to myopic boundary protection. While I support the home rule concept and believe in the sanctity of local governance, it appears that merging basic services would save a lot of money without inhibiting local decision making.

My reflection here is generally rhetorical. However, U.S. economic challenges will not magically disappear, even with a stronger economy. At some juncture, a new era of wise public management must approach consolidation and resource sharing to preserve precious resources. After reviewing several studies, it seems that some reformists have spent considerable time demonstrating the value and feasibility of merging services. The city and county of San Francisco are two entities with one such success story. How much public revenue could be saved through sensible merging of parks, public works, transportation, utilities, recreation programs, information technologies, GIS, public safety, vehicle maintenance, etc?  What if it could save billions without any degradation in service delivery?

While there has been a trend toward intergovernmental partnerships, this is not the same as permanent consolidation. Partnering agencies retain their layers of infrastructure and facilities, while collaborating mostly in planning and service delivery. The public may see more effective service delivery; it rarely sees significantly reduced costs. Admittedly, the pain of reduced resources has forced some government entities to drift toward consolidation, but these have been defensive, survival-motivated moves rather than an indication of a new era in public administration.

Change will most likely require legislation and an entirely new vision for public service delivery. The real question is whether such monumental change will ever be driven by wisdom, vision and proactive thinking or by enormous social and economic pain that leaves no other choice. The former motivation would be my choice.

jfl-pic-blue-shirtyellow-tie1.jpgWith 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 government 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 2010 book, Planning the Future – A Guide to Strategic Thinking and Planning for Elected Officials, Public Administrators and Community Leaders, is being hailed as the best book for public managers and community leaders who are committed to building a sustainable future.  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).

Over the Horizon

I have often encouraged readers to ‘get on your tiptoes and look over the horizon.’ The practicality of this advice is grounded in the value of being an early adopter or adapter while also being able to spot emerging issues and challenges. A couple of weeks ago, I stressed the importance of understanding the various transformations that are taking place in America and throughout the global community, but it also contained an implicit warning that prescience requires the courage to explore current and anticipated realities that could very well sink our collective ship. The simple question remains, ‘How many have the will to indentify and face those impending challenges that have the power to alter the very foundation, fabric and course of this Nation?’

Converging Variables

The U.S. faces several enormous challenges. Among the most important are:

a)       After years of being the 800-pound economic gorilla, the U.S. must now face global economic competition at an entirely new level. Every community, business and industry in America must be prepared to compete on a more even, no-holds-barred field…but are we fully prepared and will this occur rapidly enough?

b)       Global communication and shared information / knowledge require aggressive new policies, processes, platforms, and perspectives that utilize rather than deflect and discount how information is driving social and economic evolution. Did anyone notice the recent backlash when the concept of a free national Wi-Fi network was proposed? Yet, other countries have broader and better Wi-Fi than the U.S. system, which was created by private companies that squeeze every dollar out of consumers while providing marginal service.

c)       As a country and people, we spend more than we make and borrow to pay the bills. This is totally unsustainable and has led to enormous deficits-not only due to federal government largess, but due to a culture driven by entitlement, avarice and myopic lifestyles. Deficits are strangling this country, but will we act before it is too late?

d)       The ‘threat’ of rapid climate change and ensuing drought, floods, hurricanes, fires, and other unpredictable mayhem  is no longer ‘possible’ or ‘probable’ but is now an annual phenomenon. Prevention has ceased being the best option…we are now in the costly stage of preparation, mitigation and annual recovery cycles. Who bears the brunt? State and local government.

e)       Energy consumption continues to soar, increasing dependence, depleting reserves, and fueling an economy based on cheap fuel. Over time, this cycle will end. Are we doing enough to prepare for the next energy cycle and is there a plan to evolve? Or, will we ride this pony until the end, then, a day late and many dollars short, finally seek new options?

Other Realities

In addition to these realities, there is a very real horizon relative to loss of institutional memory as Baby Boomers retire after building so much of what currently exists. Do newcomers have the required core competencies to take business and government to the next level? With training and professional development sadly lacking at virtually every level of federal, state, and local government and throughout industry, there are signs that sustainability will become a greater issue within five to ten years.

While savings have increased, the average retiree has less than $50,000 saved for a retirement that may last 20 to 25 years. Social Security will hardly be enough as food, medical, energy, housing and long-term care costs escalate. Are we ignoring a huge segment of society that is wholly unprepared for the next two to three decades? What is the role of government? What about personal responsibility? What will happen to all those people who are without the means to survive as they age? 

Some social scientists and economists report the evolution to a service economy while the data indicate a growing resurgence in on-shore manufacturing. With off-shore labor and transportation costs rising, there is a very real possibility that the U.S. will regain greater prominence as a creator and producer, allowing time for the service economy to mature. What are we doing to understand the dynamics associated with these parallel economic opportunities and is American business properly positioned? Is government creating the ideal economic environment?

The fantasy surrounding oil independence is both remarkable and troubling. While natural gas and coal are plentiful, oil reserves are difficult and expensive to reach and refine; demand is rising and under careful examination the entire industry appears to generate more questions than answers. There are too many conflicting reports of oil quality, extraction costs, environmental damage, and long-term accessibility for me to fully sign on. Some well-credentialed pundits have opined that it is a massive scam to assure citizens that all is well regarding energy. I do not subscribe to the conspiracy theory but am moved to seek truth when I see so many conflicting reports from supposedly reliable sources.

What is the plan for U.S. education, infrastructure, health care, entitlement and military reform? All are teetering on a slippery slope compounded by short-term planning, inconsistent priorities, insufficient funding, archaic reasoning, and decision makers who grasp neither the pace nor the magnitude of the current and predicted global transformation. Leaders have vision; they take the long view and can describe the rational and implementation tactics of desired strategic outcomes. A massive and challenging horizon is approaching at a speed that was unimaginable even fifteen years ago. Big things are happening here and abroad. Are we prepared? Are we going to be? When will we begin, and I mean seriously begin, to get ready?

jfl-pic-blue-shirtyellow-tie.jpgWith 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 government 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 2010 book, Planning the Future – A Guide to Strategic Thinking and Planning for Elected Officials, Public Administrators and Community Leaders, is being hailed as the best book for public managers and community leaders who are committed to building a sustainable future.  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).

The Art of Transformation

Various trappings of success and progress have so far gilded Q1 of 2013, perhaps signaling an even greater probability for a continuing upward trajectory. It feels good, the numbers are decent, and momentum seems to have escalated past the doldrums experienced during much of last year. It almost seems inappropriate to begin the next sentence with that anxiety-producing and negating word, However…

 A deeper examination and greater reflection reveals signs worth considering. Optimism is often another word for self-delusion and can be the ultimate counterproductive characteristic of a transforming economy and culture. Since the DOW peeked over 14,000 and continues to hover in the high 13s and a newly amended jobs report indicates even more jobs were added over the past three years than originally stated, there is some evidence that an elusive corner has been turned. But, as Lee Corso is apt to rejoin, Not so fast my friend!

 The current transformation is global and all-encompassing. More critically, it will continue for the remainder of this decade as developed and underdeveloped countries experience structural, political, economic and social changes that are inherently difficult and unsettling. It is now clear that the Earth is warming much faster than predicted in 2007. An enormous amount of ice has been lost from glaciers and sea ice throughout the world, temperatures are generally hotter, drought is becoming more prevalent and unpredictable, and violent storms are becoming the norm. Paralleling such evolutionary climatic change, society and business should be revising and recalibrating various elements of agriculture, financial services, water distribution, building codes, emergency planning, service delivery and new product development. Unfortunately, far too little is being done while we foolishly postpone action, incorrectly assuming there will be a magical return to ‘normal.’ Or, as the fiscal cliff debacle indicates, continue diddling with decisions that, were government a business, would be made in one brief meeting.

 Historically, the shift from agriculture to an industrialized society brought enormous new social, cultural and economic opportunities. While neither seamless nor without difficulty, American society made the rural to urban shift during the past century, while inadvertently positioning itself as leader and benefactor of much of the free world. Similarly, we are now experiencing a momentous shift from manufacturing to a service economy, but acceptance and understanding of its value has occurred far too slowly. Why should this concern us?

 During the 1920s, as so brilliantly reported by Timothy Egan in The Worst Hard Time (Mariner Books 2006), there was a perfect storm of climatic shifts, poor agricultural decisions/ policy, an unprepared financial system, a preoccupied federal government, and the convergence of industrialization and urbanism. While the recession triggered in 2007 may not equal the Great Depression in terms of its catastrophic depletion of this country’s will and resources, it revealed corrupt practices, foolish policies and social inequities that contributed to a tipping point that was barely averted by action, grit, and the accumulation of enormous debt. We spent our way clear…but for how long?

 My concern is that few apparently grasp the fact that this country and the entire global community is undergoing a transformation of epic proportions. Virtually nothing is or will be immune from major technical, economic, social, political, climatic or cultural shifts that will change everything we know. Entire regions are in play in Africa, the Middle East, Europe and Asia, cascading toward…something different.

 Transformation requires understanding the forces energizing and motivating implosive or explosive activity, as well as those technical innovations that drive social evolution. As noted here before, it is essential to look past what is occurring or spend too much time wondering why it is occurring and focus on impact. There is a certain art here; the ability to understand what and why, but to also be prescient enough to recognize value, opportunity and emerging options. My best advice remains to read all you can, analyze what is happening and understand how it might impact your community, family and organization.

 Social evolution occurs whether we like, understand, or accept it. The ability to remain clear, knowledgeable, and responsive to emerging challenges has become an essential characteristic of this transforming world. The best part is that old adages continue to apply to every community – go slow, look before you leap, seek first to understand, and know when enough is enough. Good advice as we power through this first quarter and set our sights on a sound, progressive 2013.

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).