| LUCID PAGES | ECONOMIC CRISIS | |
| Overpopulation | This
pages discusses the social causes of the current economic crisis. The
visitor is encouraged to first read the webpages Intelligence and Overpopulation to learn about the broader aspects of personal mentality and
the forces that shape human behaviors. INTRODUCTION Economic ups and downs are natural phenomena. The usual force driving economy is psychology of the masses. Their mentality is produced by complex interactions between beliefs and behaviors of individuals. Because of traumatic childhood experiences in most people, the society consists of many subjects with damage to their brains and mental functions. Instead of using advanced intelligence and working toward a common social good, the majority of people default to animal-like mentality and only care about themselves. A related problem is that most people want to enrich themselves to a maximum extent. They ignore the impacts of their behaviors on the future and tend to live beyond their means. When such social mentality persists for a while, it leads to unsustainable economic demands, and a downturn of such a lifestyle becomes inevitable. This is why most economies do not have steady trends, but exhibit fluctuations. These corrective ups and downs are usually mild. By contrast, the present economic crisis is occurring worldwide and is deep because of global economy. Global economy is a relatively new phenomenon that began gaining strength in the 1970's, and particularly in the 1980's. Crude oil was one of the early commodities that was traded around the globe. Later, production began to migrate from industrialized countries to the Third World to cut labor costs. The effect of this change was enormous. Traditional world powers slowly began losing their scientific and especially manufacturing strength. The know-how has been evaporating. Loss of manufacturing jobs downgraded the industrialized labor force. What used to be a strong middle class in the 1960's and 1970's began to look like a lower class by the 1990's. This trend has become very strong in the 21st century. For all practical purposes, trade unions and the middle class of the industrialized Western world have been severely downgraded. Along with the loss of domestic jobs, the remaining jobs have been filled by immigrants from former Communist countries or from the Third World. The immigrants have been willing to work for lower wages, and Western employers have been more than willing to hire such workers. The loss of economic strength and the unrelenting desire of the now impoverished and underemployed Western workforce to live above one's means have created conditions for an economic collapse. The collapse has been inevitable because a society that does not produce goods, has no income, and cannot buy goods made abroad cannot live on credit forever. Sooner or later, the society will have no counter value to offer for credit. The value of a family house has served this purpose for a while, but without sufficiently paid jobs, many people have been unable to pay their mortgages, not even property taxes. With the erosion of the biggest family assets, economy could have only moved in the downward direction. The collapse has been caused by the whole Western society. Manufacturers were greedy and tried to make bigger profits by moving jobs abroad. They did not understand and did not care that by destroying the middle class they convert the USA (or other industrialized western country) into a failed state like Mexico, which has a small upper class, nonexistent middle class, vast masses of very poor people, and federal taxes are collected by playing lottery. The general public of the USA wants good life financed by credit. "Live today, pay tomorrow" is the American way. This mentality worked so well in the 1960's and 1970's, when there were high-paying jobs, but failed miserably in the 21st century. Inability of the bulk of the U.S. population to change its mentality and live sensibly has resulted in expensive purchases that were not backed up by economic realities. Financiers have helped fuel the public mentality by providing easy credit. Anyone who wanted to buy an expensive car or a mansion was a welcome customer. To further boost profits, financiers engaged in risky business deals and did not keep enough cash reserves. Similarly, the credit-driven economy affected the minds of the U.S. Congress. The government has been approving multi-billion dollar expenses in needless wars. The total cost of the Iraq war, when everything is said and killed, is expected to cost between $600 and $3000 billion. Like everyone else, the military industrial complex wanted to make obscene profits, and the government has been more than happy to oblige. The flimsy house of cards had to collapse some day because the economic practices of the public, manufacturers, banks, and government have become unsustainable. Interestingly, to solve the economic crisis, the government has bailed out the worst offenders with public money, so that managers of the failed companies could give themselves multimillion dollar bonuses. On top of this obscenity, the federal, state, and local governments have been increasing taxes in times of economic crisis; in effect doing an equivalent of price gouging during a time of national emergency. These behaviors indicate that America will be unable to recover from this economic crisis unless the country gets a new government, new laws, and new social policies. SYSTEMIC FLAWS In addition to the above-mentioned defects, national mentality also plays an important role. The fact is that the American sociopolitical system has major inherent flaws. Existence of these flaws allows economic crises to become deep and unmanageable. Problem #1 is absolute power of the government. The U.S. government is partly elected and partly nominated. Elections are heavily sponsored by two political parties that promote their kind of people. Independent candidates have a slim chance of being elected to public office. They have insufficient money to campaign and often do not reflect the voracious and careless mentality of the broad masses. Presidential candidates Dennis Kucinich and Ralph Nader got just 1% each of the total votes, even though they were the most sensible candidates in previous elections. The public did not want to elect messengers of harsh truth, but wanted to hear reassuring positive messages that have no basis in reality. Incidentally, candidates with the "people's mentality" have been elected to public office to run the country and its economy. Problem #2 is concentration of too much wealth and power in a small number of people. Big industry and other rich entities have become inseparably connected with the U.S. government and promote policies of maximum short-term profit with no regard for the future. Even worse, most citizens do not care what the government does. People think that by electing a president they have done their best, and let the government function any way the government wants to. Because of this mental flaw, American democracy is not factual, but only theoretical. Policies and laws are implemented with no regard for the common man. An example is provided by international economic treaties that allow to cheaply manufacture products in Third-World countries and import the products to the USA with minimal or no taxation. This economic arrangement destroys domestic manufacturers and leads to a snowballing effect. Out of necessity, more and more manufacturers decide to move their operations abroad to remain competitive. Along with transfer of our economic strength to other countries, and especially to our potential military adversary China, we also transfer technology, science, and military secrets (including rocket guidance systems and design plans of US nuclear weaponry), and help China become more technologically and scientifically advanced than we are. At the same time, the rise of China leads to global competition for natural resources, such as copper, iron, and crude oil. Even worse, some pro-Chinese countries, such as Australia, are doing their best to sell China raw materials, and over time the whole Aussie country. Problem #3 is given by global competition. Poorly educated Americans are unable to compete with the academic abilities of the Asian populations. The Japanese, Koreans, Chinese, and Indians are workaholics. Acquiring scholastic knowledge and being able to satisfy the employer's needs is a matter of life or death in eastern cultures. Serving wholeheartedly to one's master gives rise to personal pride. No American wants to work 14 hours a day as they do in Korea. This weakness of American workers is exploited by American producers who hire workaholic foreigners at lower wages. Thus, American labor force is displaced in its own country. Problem #4 is American belief in national superiority. Just by being an American makes a person the best in everything he or she does. This mentality got a big boost during WWII. While the world was fighting and suffering, America had full employment and benefited from making weapons. American territory was not damaged by the war, and the nation emerged as a dominant economic and military power. American standard of living became the envy of the world, and Americans enjoyed their status both internationally and domestically. Bigger and more complicated products were celebrated as symbols of achievement and power. Quality, efficiency, recycling, and environmental protection were concepts that found no meaning in the minds of the BIG nation. While postwar Europe was building tiny passenger cars, Americans were producing heavy gas-guzzling monsters. That was the American way of life, but changes began showing abroad. Because of limited resources and a unique national mentality, Japan was dedicated to quality rather than quantity. This approach showed in the construction of pocket transistor radios and simple inexpensive cars during the 1960's. Over the next 20 years, Japanese persistence and dedication to innovation resulted in the best electronic and automotive products in the world. Meanwhile, America took the approach "If it ain't broke, don't fix it." American car makers were building the same old monsters as decades earlier, and the unsophisticated American consumers largely went along. The sales of domestically manufactured cars were slumping, but instead of changing their bad behaviors, American car makers appealed to redneck patriotism with slogans, such as "Buy American." This mentality clearly failed in the 21st century. High vehicle prices along with the lack of quality, efficiency, appealing style, and human engineering have brought American car makers to the brink of bankruptcy. The public has contributed to the problem by buying the poor products for a long time, by wanting oversized cars, and by living a life of excess. Problem #5 is that introduction of cheap products from the developing world has driven domestic manufacturers out of business. The mentally damaged Western consumers have only been concerned with the immediate price they pay for a product, while ignoring quality and the broader socioeconomic impact. For example, a $2 nutcracker seemed cheap to buy. A domestic product would have cost at least $5. After a dozen cracked nuts, the cheap product broke, but it is no big deal. The Christmass season is over now, who cares? The next year, the shopper is smarter. He knows that nutcrackers do not last too long. He buys five of them. He can do so because they are darn cheap. And they last the whole holiday season this time. No way he is going to buy the domestic product. It is too expensive. Pure psychopathology! THE SCOURGE OF CAPITALISM Capitalism, and especially capitalism of unlimited competition, has had major effect on the current economic problems. Humans are by their nature savages and try to live for the moment. Capitalism supports this mentality through social and economic laws. Such a socioeconomic system is ideal for countries with no middle class. The very poor are willing to do anything to survive, and the super rich enjoy their supreme power. But such a system also has serious problems that affect the high society. Because of poverty, there is corruption in public offices. Also the overall level or crime goes up tremendously. Rich people get kidnapped for ransom. There is increase in organized criminal activity involving drugs, weapons, black marketing, slavery, and extortion. Very poor people have bad hygiene and are likely to be carriers of infectious diseases. The whole country lacks human, scientific, and industrial potential, and is prone to be conquered by other powers. Since the purpose of capitalists is to maximize profit, the environment suffers and is exploited to the utmost. With no factual democracy and with no strong middle class, there is no force to influence bad behaviors of the super rich. The described form of capitalism used to exist in Western Europe in the 19th and 20th centuries, but has been transformed into more responsible systems. Among the most prominent changes have been rights to nationally provided medical care, limited work hours, safe work conditions, vacations, unemployment benefits, and retirement pay. The USA lags far behind Western democracies in many ways, but even the USA has adopted some laws that dampen wild and free capitalism. Putting in place some limits has become a matter of public safety and survival of the high society. The most important aspect has been restriction of private ownership of strategic weapons, such as aircraft carriers, nuclear submarines, and land-based ICBMs. Having these weapons under national control for a common good is self-evident. Also national control of the military industrial complex makes sense. Unfortunately, the USA has done little to nationalize medical care and key industries. Likewise, the USA has done little to protect the country against human, economic, agricultural, and other competition. Furthermore, even nationalized assets, such as forests and federal lands, have been factually re-privatized and given to cronies of the administration to use and abuse. In fact, privatization of America has been so vast that the country has been unable to create a national driver's license, a unified police force, or a national prison system. Every state and jurisdiction wants to make a buck and resists simplification of bureaucracy. These issues reveal that our economic crisis is closely dependent on social mentality. Until the thinking and behaviors of individuals and the nation change, we cannot expect to make progress on the economic front. WHAT HAS CHANGED? Capitalism has thrived for 200 years. Production was increasing, and the buying power of the middle class grew, too. There were raw materials to be found in large quantities; all that was needed was to find them and get them. There were sparsely populated lands with huge natural resources, and with no opposing forces that could have stopped the spread of Western capitalism. The American West only became the focal point of the eastern USA by the 1830's. The California gold rush in 1849 brought a big wave of newcomers, but the Northwest only became important at the end of the 1800's. In Canada and South America, there was free space to be exploited until the end of WWII. Similar situation existed throughout the world, but WWII signaled the end of imperialism. The once mighty Great Britain became just one of several European powers. During the last 50 years, most colonies fell and became independent countries. Since the 1970, even the originally backward countries started building industries. The change was most noticeable in Asia. By the year 2000, the whole world was exposed to modern technology and its products. Some formerly agrarian countries, such as Korea, Malaysia, India, and China have become hubs of industrial production and high-tech research. With prosperity also came problems. The human population increased from 1.5 billion in 1900 to 6 billion in 2000. At the same time, water, food, and other natural resources became noticeably scarcer. The high level of human and industrial burden on the environment has produced climatic changes, which further affect the availability of food and water. The planet has reached its carrying capacity, and capitalism of free competition is no longer a viable way of doing business. It is no longer easy to occupy other countries to get their natural resources, and there are no uninhabited places to populate. In addition, economy has become global. The need to transport materials and goods from one place to another is much higher now than it was in the 1970. It has been financially advantageous to pay for the transport. Even with the added cost, manufacturers make bigger profits because they save much more money on labor. But this business model is about to change. Crude oil now costs more than at any time in the past, and man-made pollution has become a serious problem that threatens human lives. As natural resources become even scarcer and the Third World populations become more educated, industrialized, demanding, and environmentally aware, it will become more expensive to import goods from distant lands than to manufacture them locally. Over time, there will be relative socioeconomic equalization throughout the world, and goods will once again be produced where they are consumed. It may take another 10 to 20 years before this economic trend becomes strong, but demise of global trade and global economy is inevitable. It will happen not because people come to their senses and become more responsible, but simply because of higher profitability or because of political reasons brought about by overpopulation and environmental destruction. The transition will not occur smoothly, but amid a ruthless struggle for resources. How humanity handles the next 20 years will determine whether civilization survives or perishes. JOBS IN A DOWNWARD ECONOMY One of the worst problems of the current economic crisis is loss of jobs. The loss is widespread and absolute. In previous downturns, people could find lower paying jobs, but the current economy has no jobs, not even manual labor. People who are still employed are forced to work harder to keep their jobs. Most employed Americans had low savings before the crisis began, and now are living from paycheck to paycheck. One hiccup can send many a family on the street with no way of surviving. People who lost jobs only recently still collect unemployment benefits, but these will expire one day. There will be no jobs waiting. The crisis is deepening; more businesses are closing, and additional people are finding themselves unemployed. Meanwhile, the news media are urging people to keep looking for jobs. One day, there will be a job opening, is the common theme. In reality, roughly 10% of the American workforce are unemployed or stopped looking for jobs. A small fraction of the 10% may find jobs, but most people will stay without jobs and will be unable to support themselves. Moving in with other relatives may be a survival strategy because new jobs are not coming any time soon. Part of the problem is unnecessary employment during economic boom. There used to be millions of perk jobs in the past, mainly in the service industry. When crises occur, service jobs are shed and people only spend money on necessities. This mechanism exposes the true nature of employment in a capitalist society; there are too many useless businesses, jobs, and people. The current crisis is further amplified by overpopulation and overexploitation of the environment. In the past, extensive economy created new jobs by using untapped resources. The world of today is fully crowded, and resources are limited. There will be no way to sustain and employ vast masses of voracious humans in the future. The earth has reached its limits. Without solving the problem of overpopulation, humanity will be unable to get out of this economic crisis in the long-term. WAY OUT OF THE CRISIS Overcoming the current economic crisis is extremely difficult, if not impossible. The crisis has been caused by human behavior and by the psychological forces behind it. Human values and mentality will not change in the foreseeable future. The chosen way out of the trouble will be reliance on the same bad mental faculties that have created the crisis. As it happens in all human activities, the underlying causes of the economic downturn will not be addressed. Instead, individuals and the society will try to solve the crisis by treating the symptoms. Even worse, the government will not give a helping hand to those who need it most, but to the richest 1% of the population who need financial help the least. The government and the nation will not discourage bad business practices, but will promote them. Examples of these negative "solutions" include strip mining and mountain top razing in Appalachia, development of natural gas fields in Colorado, opening of coal mines in Montana and Wyoming, and drilling for oil in coastal waters or in the arctic. The government will not stop costly military engagements abroad, but will expand the wars to new territories. Obama and his government are already planning to send more troops to Afghanistan. The nation will not reject the practices of savage capitalism, but will enhance them. The world will not cut down the release of harmful gases, but will increase their release into the atmosphere. Despite this pathology, there will be minor and temporary successes. But they will have no major positive impact in the end. The trends suggest that an economic recovery in the present sociopolitical climate will have few chances to succeed, and many opportunities to worsen. The main reason is psychopathic mentality of humanity. Under the circumstances, it makes no sense to draw realistic plans for a way out of our trouble. Any sensible plans have to be viewed only as hypothetical approaches that would make sense, but will never be implemented. If the USA consisted of sensible people with well developed emotional intelligence, the way out of the crisis would have been easy and straightforward. The measures would require to do away with the obstacles, systems, and mechanisms that have led to the crisis, and to implement policies that would prevent future economic depression. The steps would involve the following: Social Reorganization
Creation of Jobs
The suggestions may give the impression that the goal is to create artificial employment even when there is no labor available, or to produce goods by using inefficient methods. Such approaches might be useful in the short run to create full employment, but the goal should not be to have an ineffective economy. The goal is to find a healthy balance between profitability, environmental integrity, and social stability. Social instability is the biggest threat to any society. But achieving social stability at the cost of other important aspects of life will only produce bigger instability in the future. This is why the environment and social issues have to become an integral part of economy. One of the biggest problems of unlimited competition is that anything goes. This irresponsible approach seeks maximum profit with no worry about the consequences. Reduction of labor costs is the usual goal of most producers. In forestry, a method of clear cutting is favored because plundering a whole area and leveling it with bulldozers is less expensive that doing selective removal of only a few trees. Similar mentality exists in agriculture. Yields are increased by employing destructive techniques and chemicals. The same approach exists in manufacturing. Costs are cut by using less expensive but dangerous techniques and materials. The total price of such practices is high to the society. There is environmental destruction, toxic pollution, and illnesses. By contrast, environmentally friendly methods would be more labor intensive, would employ more people, and would promote social stability. Of course, this approach goes against the voracious mentality of most capitalists. The issue here is not prosperity of capitalists, but maximum profit at any cost. Rich people do not need the money they make. They often give billions to charities or spend their money needlessly. The magnates are greedy and stingy because of pathology. If we could tame this beast, there would be good life for everyone. America is a very rich country; the problem is that social wealth is not distributed in a sensible way. Most capitalists do not understand that by paying decent wages and behaving in socially responsible ways, the capitalists secure their social status, wealth, and future. Since the psychopaths do not get it, the society as a whole should step in and limit the influence of individuals on the world and economic activity. This is why the state/nation should become the dominant social and economic force and be under the actual supervision of the People. The social arrangement would not abolish capitalism. Entrepreneurship and private ownership of considerable property would still be alive, but would have to stay within socially imposed limits. No person or corporation would be able to pollute a river simply because they can and there is no punishment. No timber company could cut down miles of national or private forests simply because they have the technology and a crony in the White House. Control of the state by the People is the only way to safeguard responsible behaviors by those who have the means to affect the world. This means that special and local interests would have to obey the will of the nation. By contrast, human ignorance has caused that presidents and their lieutenants have been using the state for personal enrichment and for distribution of public wealth to their cronies. The People will have to step forward and reclaim their country if they want to get out of this economic crisis. Policies Favoring Domestic Employers
Measures like these should eliminate foreign competition by banning it or by taxing it out of existence. As a whole, America cannot compete with its inferior products on the international stage. Industrial goods are no longer made in the USA or are substandard. Food products are either genetically altered or affected by industrial pollutants, antibiotics, herbicides, pesticides, and garbage feed. No sensible person in the world will eat such harmful produce. It is only good for Americans. They will eat the junk food. Likewise, work ethics of slaves who work 12 or 14 hours a day for meager wages are not acceptable to most Americans. This is our country and we can make it work for us. We do not need to compete with the world. We can force the government and employers to pay decent wages, and we can ban foreign products to enter our markets. Whether or not some other country can make products cheaper or can make them better will become irrelevant once we close our borders to outside economic influences. Other Policies Favoring Socioeconomic Progress
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| Updated Apr 30, 2010 | Unpubl |