A Big, Giant, Unsustainable, Idiotic Loop

I'm no economist. With the exception of one Japanese language course I took while in the Navy living in Japan, I have no college experience. I do know how to read. I do have common sense. The more I learn about how our economy works (or is expected to work), the more completely baffled I become by it. How anyone can defend this system, which seems to be based on false assumptions and a flat out disregard for reality is beyond me.

While the news on the economic front grows dimmer and dimmer, defenders of our system grow ever more cynical in regards to talk of recession. The new buzzword among free market capitalists is "economic slowdown", as if we're just hitting a speed bump, and we'll be fine in the coming months. Congress and the president have yet to come up with a stimulus package to "bail out" the economy because they've yet to figure out what will work. Why is this task so difficult? Perhaps they are finally seeing that this system doesn't work in the long run, that their economic advisers are giving them bad advice, and they have no idea exactly how to fix it. From what I've read so far, any stimulus package they throw out at this point would be like applying neosporin to a sucking chest wound. Not enough, not even close.

An Associated Press article that was published today focused on gift cards, and their place in the market.

According to the article, WalMart is reporting that people are spending their gift cards on groceries and other necessities. Historically, gift cards have been used to buy iPods, DVDs, DVD Players, video games, and other luxury items. This news must have free marketeers shaking in their boots. After a dismal holiday shopping season retailers experienced their worst January in four decades.

The idea behind a stimulus package would be to put more money into the hands of consumers so that they then go out and stimulate the economy with that money. This doesn't work if people pay bills with it, or buy groceries. Our consumption of luxuries is what keeps our economy rolling, and we simply can't afford those luxuries anymore.

This, in my opinion, highlights a key systemic flaw in our economy. In this system one of the ways most companies, big and small, make a profit is through cheap labor. Whether it's McDonald's outsourcing drive-thru jobs to India, or Starbucks busting unions to avoid paying decent wages and providing benefits, they focus on minimizing payroll.

The flaw lies in the fact that the very workforce that is paid low wages for long hours are the same people expected to buy and consume in order to keep the economy rolling. Of course we are in a credit crisis, of course people sign loans without reading the fine print, George Bush told us to keeping shopping, that it was our patriotic duty as Americans to get back at Osama by spending money. Even money we don't have.

The frustrating part is that it seems so obvious to me that you can't squeeze people on one end (low pay/long hours) and then expect them to be able to spend money on luxury items. Without amassing debt that is. Always wanting to be good Americans, we got credit cards, and we spent that money because we were assured that happy days, if not here now, would be back soon, and that debt was more profitable than actually spending money you have in your pocket. How long did economists really think this could last?

It seems we are being faced with an economic crisis that should challenge how we think about our economy, our consumption, and the value we put on our lives. If we want to do away with poverty, if we really want to confront environmental issues, and if we truly want peace in our world, then we have to take a fresh new look at how we structure our economy and who reaps the benefits of it.