New Sherwood

Hard times, part II

Chris of The Yeoman Farmer left the following comment on the Hard Times post below:

“I hate to play the skeptic, but this whole train of thought is reminding me of the runup to Y2K. I’m embarassed to say that I took the doomsday scenarios more seriously that I should have, and as a result I’ve grown far less ready to accept predictions of impending economic/social doom. At heart, I’m an optimist — because markets are remarkably resilient things, when allowed to function freely. High energy (or food) prices are painful things — but higher prices tend to spur entreprenurship (to reap the benefits of that premium pricing) like nothing else can.”

Chris, it reminds of Y2K as well. Although Y2K itself proved to be a non-event, I think the anxiety behind it – and behind the current economic quagmire – has legitimate roots and should not be summarily dismissed. Markets are indeed resilient, and I agree with your remarks about scarcity and entrepreneurship, but markets are never enough, and some markets can be harmful when they are “free”. Banking seems to be one of them. I think you will agree that the resiliency of markets is entirely dependent upon sound underpinnings – most importantly a culture of trust and financial integrity. When the underpinnings are weak, as they were in 1929 and most assuredly are in our times, markets can fail along with everything else. Here are my thoughts on why many ordinary people see disaster ahead:

1. Deep down, Americans know this country has been enjoying a false prosperity for five or more decades, a prosperity that cannot continue indefinitely. Most Americans have been living beyond their means and they know that the economic “scales” need a radical re-adjusting.

2. Of those who are wealthy and saving money, there are three types: a) those who have “earned” their wealth unjustly; b) those who have worked honestly and diligently but whose wealth seems disproportionate to the quality of their labors; c) those who have received their wealth through favors, connections, or inheritance. The men in the first category are large in number and they have reason to be afraid: justice will find them, and perhaps soon. The men in the second category have reason to be anxious because we live in historically aberrant times. Market rewards have little relation – and sometimes they have even an inverse relation – to whether a certain kind of activity is intrinsically good or worth doing for its own sake. This eats away at the conscience, and one feels that, one day, the scales will surely be balanced. The men in the third category are anxious because they live in a country which believes, as a matter of sacred ideology, if you didn’t earn it, it isn’t yours and you are more a thief than an heir. In a normal society the response would be gratitude and its corresponding works rather than anxiety. Unfortunately this anxiety results in behaviors that may help fulfill the doomsday prophecies.

3. The modern global economy is too big and too complex for anyone to understand. Therefore it has taken on god-like qualities and is seen as an omnipotent beast whose demands must be met, a ruthless master that rewards and punishes according to its own arbitrary laws – laws which are impossible to know with certainty. With a master like this, we are bound to make a mis-step sooner or later, and we wait for the other shoe to drop.

4. Men and their empires, nations, and economies all come to an end. There is no reason to believe the United States will be the exception to the rule.

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March 31, 2008 - Posted by | Uncategorized

8 Comments »

  1. Hmmm… I think I am already well prepared – dirt poor and used to living on Ramen noodles.

    When the hard times come, I am well positioned to be king.

    Comment by asimplesinner | March 31, 2008 | Reply

  2. The thing is (as I preach to the choir), we always should be as physically and spiritually prepared-especially as fathers and heads of households- as possible for trying times.

    Ideally we should strive to be as debt free as possible (even mortgage-free in the current $ environment) and have some self sufficienciency skills so as to be able to feed our family and others -because there are always others in need.

    Now I have a long way to go myself on both these counts-but always be working for it and don’t spend time worrying.

    God bless-Jim

    Comment by Jim Curley | March 31, 2008 | Reply

  3. Jeff –

    I tend to agree with you about living beyond our means. Unbelievable the way people treated their houses as virtual ATMs for all those years, thinking rising home values would forever bail them out…but what happens when we discover there is no equity behind those home equity lines of credit?

    Where I think your post is a bit unfair is in making no account for those who have accumulated an honest amount of wealth by using honest means. This is front and center in my mind, because I just spent a few days visiting my parents in Arizona. They, along with many friends, accumulated comfortable nest eggs the way we all agree they should: by working hard, investing, delaying gratification, and staying married to the same person for life. They’re far from rich, but have earned a comfortable and enjoyable retirement. I hope to emulate them.

    I think such folks are more common than you think; I sure saw a lot of them in my parents’ community. Perhaps I should say, for the sake of our economy’s long-term health, I sure HOPE such folks are more common than we think.

    Comment by Chris | April 1, 2008 | Reply

  4. “Where I think your post is a bit unfair is in making no account for those who have accumulated an honest amount of wealth by using honest means.”

    Actually, I think I did take these people into account:

    “b) those who have worked honestly and diligently but whose wealth seems disproportionate to the quality of their labors … The men in the second category have reason to be anxious because we live in historically aberrant times. Market rewards have little relation – and sometimes they have even an inverse relation – to whether a certain kind of activity is intrinsically good or worth doing for its own sake. This eats away at the conscience, and one feels that, one day, the scales will surely be balanced.”

    Let me explain further. Many people become wealthy by working honestly and diligently at installing TV satellite dishes, engineering tall buildings for financial institutions, selling business opportunities, writing computer programs for government data collection, etc., etc.. Such people are good at what they do and they do it with honesty and integrity. I don’t begrudge them their earnings, not one bit – in fact I am striving to do the same thing myself. But the point is that, in today’s economy, the man with a satellite dish company earns more than, say, the man who publishes good Catholic books (and the latter is not complaining!). The architect who designs skyscrapers earns more than the architect who designs churches. The man who installs the sound systems for rock musicians earns more than the sound engineers for the local symphony. Etc. The point is that the market rewards are out of whack, they don’t reflect a hierarchy of objective good. The “market” overpays for mediocre things and underpays for good and excellent things.

    Comment by Jeff Culbreath | April 1, 2008 | Reply

  5. Now I see the point you were making — and interesting observation about the market over/underpaying. I might further clarify this by pointing out that the person who designs beautiful churches (or publishes Catholic books, or runs a nonprofit organization) may be paid less MONEY in exchange for what he produces, but he receives much greater “intangible” or “intrinsic” rewards than the person who installs satellite dishes or rock musician sound systems. Each person makes a choice of profession based on his preferred mix of tangible and intangible rewards.

    I think it’s Professor Walter Williams who says “pay” is simply a measure of how well a person has served his fellow man. And a person serves his fellow man by providing what that fellow man wants and is willing to pay for. It’s sad that more people are willing to pay more money for a slasher novel than a good Catholic book, but I think that says more about our culture and people’s disordered desires than it does about markets per se.

    I don’t think we disagree too much here — just approaching the question a bit differently.

    Comment by Chris | April 1, 2008 | Reply

  6. “I might further clarify this by pointing out that the person who designs beautiful churches (or publishes Catholic books, or runs a nonprofit organization) may be paid less MONEY in exchange for what he produces, but he receives much greater ‘intangible’ or ‘intrinsic’ rewards than the person who installs satellite dishes or rock musician sound systems. Each person makes a choice of profession based on his preferred mix of tangible and intangible rewards.”

    You are quite right, of course. I don’t think there can, or should, be an economic system that eliminates the need for economically intangible rewards. But as the free-marketeers are fond of pointing out, when you subsidize something, you tend to get more of it, and when you dis-incentivize something, you get less of it. A market economy that leaves everything to human desire is going to get a lot of things backwards. The result is that many things worth doing will not be done at all, or will be done badly, because they are not supported by market incentives. Intangible rewards can compensate for lack of pay to some degree, but they do not pay mortgages or put food on the table.

    “I think it’s Professor Walter Williams who says ‘pay’ is simply a measure of how well a person has served his fellow man. And a person serves his fellow man by providing what that fellow man wants and is willing to pay for.”

    I disagree profoundly with Williams here, and don’t see how this can possibly be compatible with a Catholic worldview.

    In the first place, what a man wants is not necessarily what he needs or ought to have. America’s $12 billion pornography industry is an obvious example (is a pornographer serving his fellow man, or destroying him?), but the point covers the whole gamut of positively superfluous, wasteful, and harmful things that contribute to our GNP.

    In the second place, many are willing to pay for things, but are unable to pay for things – therefore, even if all economic desires were perfectly legitimate, “pay” cannot possibly be a reliable measure of meeting the needs or fulfilling the desires of one’s fellow man.

    Part of the problem, I think, stems from the language we conservatives have inherited from the ideology of “free-markets” and its political acolytes. I think the error of the free-market libertarians is that they have taken a general principle and turned it into an inviolable dogma. My point is not to discredit the idea of a market economy, which of course I do support, but to emphasize that free markets will not get us out of this mess apart from moral considerations and the control of market “externalities” – tangible and intangible.

    Comment by Jeff Culbreath | April 1, 2008 | Reply

  7. Yes, excellent point about pornography (and any number of other consumer products); I was trying to make a more general point about how things are valued by what others are willing to sacrifice to obtain them.

    I’m generally a believer in free markets as the most effective way of supplying human needs. Left to themselves, markets do a remarkable job of identifying and fulfilling needs. Unfortunately, they also do a remarkable job of fueling and satisfying our baser desires —- which is why I strongly support government intervention to limit, tax, or prohibit the trade of products which are an affront to human dignity.

    I agree that markets do a poor job aligning monetary values with intrinsic values; no doubt a movie like Bella “should” have been rewarded with more money than Friday the Thirteenth Part Whatever. But I guess where I’m left scratching my head is in wondering what alternative economic system you propose. I can’t think of a single command economy that has managed to function effectively, and frankly the thought of any benighted elite trying to micro-manage and dictate prices and compensation levels troubles me deeply. I don’t think that’s what you’re proposing, though.

    Comment by Chris | April 1, 2008 | Reply

  8. “The point is that the market rewards are out of whack, they don’t reflect a hierarchy of objective good.”

    I’m not a free-market ideologue by any measure, but I’m curious about the above quote, especially what you might say about this question: how will we get market rewards to reflect a hierarchy of objective good? who will decide?

    Comment by scriblerus | April 1, 2008 | Reply


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