Go to the ant, thou sluggard

Go to the ant, thou sluggard (proverbs 6:6)

An ant has thousands of sisters, one mother, no husband and no children. It's not the best comparison, but you get the idea.

We forget sometimes that the point of our economic system is to provide for the public good. Making money is just a side-benefit. If making money were the sole objective we'd allow the most profitable ventures like theft, extortion, prostitution and the like.

Like the ant colony, the vast majority of Americans need a daily task to provide for themselves and for the greater good of the colony. We've chosen capitalism as the model for our economy because, unlike the ant, we're fearful creatures, and we feel safest when we have at least the opportunity to have a little more than our neighbor.

Left to its own devices, a completely free market would resolve all the problems in our current economy, but it would cause untold havoc in the process. We put restraints on the free market because people need stability and security and those are things a completely unfettered economy can't provide.

In our efforts to free the markets over the last thirty years, the top ten percent of us have seen unprecedented gains in income while the middle class have been losing ground when adjusted for inflation. When the overseers make more and more money while the workers make less and less, that's a recipe for slavery, which is where we were headed.

In some ways, this current economic crisis was a needed thing. It's caused us to take a much needed sober look at what we were doing and gives us the chance to make corrections. America, and all it's ideals and convictions, works best when the middle class is the strongest. We have an opportunity now to re-dedicate ourselves to this objective. I say we take it.

Fixing the Economy--Efficiency Vs Security

So, what the heck went wrong with our economy?

In business school you're taught that the purpose of a business is to increase shareholder wealth by maximizing efficiency. Efficiency here is defined as the difference between your income and your costs. In other words: profit.

The flaw of this definition is that your costs are also your neighbors income, so the short-term benefit you get by cutting costs may come around to bite you in the end when you're able to sell less to your neighbor.

Henry Ford showed a remarkable understanding of this reciprocal nature of business when he decided to raise his employees pay to the point where they could afford to buy a car. His peers cursed him because they had to raise wages as well, but Ford's decision remains as a real watershed moment in the history of American Business--and he sold a heck of a lot more cars.

The second point to consider is that any engineer will tell you, the most efficient structure can also be the least secure and often the only way to increase security is to increase redundancy. In this way, a bridge made of six regular steel beams is more secure and more easily repaired than a bridge made of two mega steel beams.

American business has been on a thirty year efficiency binge. Down-sizing and mergers and out-sourcing became the rule of thumb. Profits rose for a while, but now we find ourselves in a heck of a lot of trouble.

Nowhere is this lack of security more evident than in the financial sector. Ronald Reagan assumed that interest rates would go down if banks became more efficient and more competitive, but what good is low interest rates if banks are so unstable nobody can get a loan?

With a new president and a new understanding of our economic problems my advice is to think small and think local. If we work to foster and promote and protect more smaller, local businesses then we introduce redundancy into the system. This will decrease profits for a while, but it will also increase security.

With many banks having to reduce their scope in the wake of the credit/mortgage crisis, this may be the perfect opportunity to rebuild the concept of local banks. There will always be room for interstate and regional banks, but local banks have to be the backbone of the system if we're ever to regain the stability we once had.

Should an era of financial instability hit again, it's a heck of a lot easier to deal with if you have more smaller banks than fewer giant banks.

I'm not saying we should abandon the idea of efficiency all together, but for us to prosper in the long run, we must find a balance between efficiency and security. For thirty years we pushed and pushed and pushed for efficiency, now, unless you want to lose everything, we have to push and push and push for security until we find ourselves back in balance.

What happened to the Republican Revolution?

They called it "the Republican Revolution", but revolutions sometimes eat their children.

They promised a new focus on the middle class, yet, adjusted for inflation, the middle class was earning less when Ronald Reagan left office than when he was elected. Today, the middle class earns less in real dollars than they did in 1970, yet the earnings of the top one percent have increased over six hundred percent.

They promised balanced budgets, yet no republican president since world war II ever balanced the national budget. They called the Democrats "Tax and Spend", yet the Republicans had another plan, spend the same or more, but don't raise taxes: not a recipe for success.

George Bush waged two, very expensive wars, but would not relent on his pre-war tax cuts. Math was never his best subject.

Instead of delivering on the things Americans wanted from them, they brought in an agenda nobody asked for. Like making abortion and death penalty laws even more divisive than they already were.

They sought to break down the barrier of church and state that had been so successful for us with prayer in school and revisiting the Scopes Monkey Trial and they maximized the mistakes of an already woefully unsuccessful drug policy that benefited no one but organized crime.

The Republican Revolution came in with great hope and great promise, but we were never able to take delivery of that promise.

It's not like we didn't give them a chance to follow through with their plan. Twenty-Eight of the last forty years saw a Republican President.

For the next two years, the Republicans are completely out of power in two of the three branches of government. Let us hope they use this time for self reflection on how and why they could never deliver on their promises and come back with a new focus on the things that are really important to the American people.

If they can't do that, then let them stay out of power until they do.

The Natural Cycle

There has been bad news about the economy lately and, in times like these, many people are worried and afraid. Don't be too afraid though, a lot of what we're going through is natural. We've been through it many times in the past and we always came back stronger.

The economy behaves like a living thing because it is made up of millions of living things and like any living thing, it goes through cycles of expansion and contraction.

Contraction is a disturbing process, but everything I read tells me we are doing the right things to come back form this strong and healthy.

We'd like to think the economy would grow forever and on the news and among economists we tend to call an economy that grows from one quarter to the next "good" but one that doesn't grow or declines "bad".

That's not a very practical way to think of a living thing though. All living things have times when they must pull back to mend wounds and correct mistakes and prepare for the next cycle of growth.

We made mistakes with the housing market and sub-prime mortgages and now our economy needs to pull back to mend wounds and correct mistakes. This is natural and nothing to be afraid of. You could even say it was a necessary thing.

Even in declining times, living things always seek a means to grow and thrive, so will our economy. Even now, people all across the nation are making plans to grow again. We will come back stronger and better than before. We always have.

Have faith in God and nature and believe in each other and we'll come through this healthy and strong.