Our Bubble Economy

                                                                An Earth Manifesto publication by Dr. Tiffany B. Twain  

Our economic system has natural tendencies towards growth and recession.  It has boomed, and gone bust, on an irregular basis throughout our nation’s history.  The Great Depression of the 1930's was caused by speculative excesses, and since then the government has been given an ever-bigger role in managing the economy and creating jobs and establishing a social safety net.  The federal government has increased government spending to increase employment, and used stimulative monetary policy and the expansion of the military as primary methods of creating jobs.

Frugality in government spending is almost a contradiction in terms.  Government employment has natural propensities to resist responsible discipline.  It is bureaucratic, inefficient, wasteful, and ridiculously entrenched.  And, because it is so extremely hard to downsize, it is the antithesis of free-market efficiency.

Small businesses are the engine of economic growth, and public policy should provide incentives for their success.  Big businesses unfortunately wield greater power, so they consequently capitalize unfairly on their power to gain for themselves more regulatory loopholes and benefits and subsidies.

We are living in a human bubble of rapid population growth and increasing consumption.  We are unsustainably exploiting finite mineral resources, and destroying old-growth forests, and depleting fish stocks, and producing enormous amounts of wastes and pollutants.

The disruption that will be caused by the bursting of our bubble of unsustainable consumption will increase as long as we delay making courageous efforts to address economic waste and immoderate propensities of humanity.  We are conducting our affairs and living our lives like spendthrift gamblers.

Consider the real estate bubble as an example of the risks that we are undertaking by providing powerful short-term incentives to benefit speculators. Tax incentives made real estate a hot commodity through 2006.  Homeowners were happy with the appreciation in their equity, so they borrowed against it like spendthrift fools.  The government had introduced more and more speculative influences into the market, including large tax cuts, tax breaks for mortgage debt interest expenses, large capital gains exclusions for real estate profits, low interest rates, and ever-more risky financing.  Real estate was finally amped up until it was significantly overpriced.  This strategy was a powerful engine of consumerism and economic growth, with hundreds of billions of dollars being borrowed against bubble-level increases in home equity being used to buy things.

Real estate speculation was bad news for poor people who could not afford homes.  It was also bad for first time home buyers who hoped to own a reasonably-priced place to live, and for those no doubt lazy homeless people we wish would just go away.  And of course it contributed significantly to unwise development and obscenely big houses for the wealthy.  It caused profligate usages of timber and building materials, and selfishly wasteful consumption of water and energy resources.

Another area where bubble economics affects us is in energy costs.  Economists note that there is an ‘inelasticity of demand’ for oil in the short term.  Demand for oil does not immediately decrease proportional to price increases, due to the fact that human behaviors do not change easily -- behaviors like driving alone, squandering gasoline needlessly, and avoiding the use of public transportation.  And of course we have a built in profligacy of poor mileage vehicles and enormous SUV's and those offensive urban-assault vehicle Hummers that were popular until gasoline prices began to skyrocket.

Some say that in a similar way there is an astonishing inelasticity of political will in America.  Political parties are stubborn, inflexible and extremely partisan.  They are so beholden to Vested Interests that they do not give good citizen goals adequate priority, so our societies become less able to adapt with agility.  It is amazing how little time elapsed after Hurricane Katrina revealed the extensive degree of poverty, inequities, poor emergency preparedness and infrastructure vulnerabilities in the South before political cronyism kicked back in, and dogmatic wrangling began over how to exploit the circumstances to private advantage rather than improve the situation.

“Conservatives" hijacked natural concern for hurricane victims in order to further advance their pet projects and their doctrinaire initiatives.  The usual causes came to the fore:  taxes were cut for the wealthy and privileged, environmental regulations were reduced, and generous no-bid reconstruction contracts were given to giant corporations like Halliburton that were cronies of in-crowd interests.  Biological diversity was assaulted by emasculating the Endangered Species Act, natural resource exploitation was accelerated, and conservation measures and solar energy alternatives were avoided.  Increased subsidies were given to Big Oil instead of pursuing paths that would have reduced our risky dependence on fossil fuels.  The Davis/Bacon Act that ensures workers are paid fair wages was suspended.  And social programs that benefit the poor were cut.

Really, guys --- Have cynicism, corruption and myopia no bounds?!

An overarching Bubble of American Military Supremacy also lurks in the background, a reflection of Neoconservative ideologies of aggressive military adventurism.  And we continue to allow Churches overweening influence in setting policies that obstruct contraception and family planning prerogatives. 

I believe we can do better, and that it is our social responsibility to find ways to achieve this goal!